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WHAT  HAPPENED 
TO  EUROPE 


THE  MACMILLAN  COMPANY 

NEW  YORK  •    BOSTON  •   CHICAGO  •   DALLAS 
ATLANTA  •   SAN  FRANCISCO 

MACMILLAN  &  CO.,  LIMITKB 

LONDON  •   BOMDAY  •    CALCUTTA 
MELBOURNE 

THE  MACMILLAN  CO.  OF  CANADA,  LTD. 

TORONTO 


7 


WHAT  HAPPENED 
TO  EUROPE 


FRANK  A.  VANDERLIP 


THE  MACMILLAN  COMPANY 
1919 

AM  rights  reserved 


COPTBIGHT,  1919 

BY  THE  MACMILLAN  COMPANY 
Set  UE  and  electrotyped.     Published,  June,  1919 


FTJHIS  book  ia  dedicated  to 
my  six  children,  with  the 
hope  that  they,  and  their  gener- 
ation, will  grow  up  possessed  of 
an  abundant  sympathy  with 
their  fellows,  and  a  sufficient 
knowledge  of  economic  law,  to 
enable  them  to  make  a  liberal 
and  wise  contribution  of  service 
to  society. 


PREFACE 

THERE  was  never  a  more  unpremeditated  book. 
We  landed  in  England  February  2,  1919,  intending 
to  take  a  hurried  glance  at  financial  conditions 
in  London  and  on  the  Continent  and  be  back  in 
New  York  by  the  first  of  April.  Almost  within  a 
few  hours,  I  found  that  I  had  known  practically  noth- 
ing of  what  had  happened  to  Europe.  The  process 
of  learning  proved  so  fascinating,  there  was  such 
wealth  of  opportunity  on  every  hand,  that  we  can- 
celled sailing  engagements  on  one  boat  after  another 
while  we  traveled  through  France,  Switzerland,  Italy, 
Spain,  Belgium  and  Holland.  At  last  we  sailed 
homeward,  leaving  Southampton  May  10th,  1919,  on 
the  S.S.  Olympic.  Up  to  the  time  we  waved  good-by 
at  the  Southampton  docks,  I  had  had  no  remote  in- 
tention of  writing  a  book  about  European  affairs. 

Sitting  down  in  quiet  with  the  strange  prospect 
of  five  days  of  leisure  after  three  months  of  intense 
activity  during  which  I  had  visited  seven  countries 
and  had  received  impressions  from  interviews  with 

hundreds  of  people  of  importance,  representing  at 

vii 


viii  PREFACE 

least  fifteen  countries,  for  the  first  time  it  came  over 
me  how  much  there  was  to  tell  about  conditions  as 
I  had  seen  them  in  Europe.  I  shrank  from  the  pros- 
pect of  going  over  the  story  hastily  with  various  peo- 
ple who  might  be  eager  to  get,  in  a  word,  my  impres- 
sions of  our  new  world.  There  was  such  a  rush  of 
observations  and,  indeed,  not  a  few  conclusions  which 
seemed  to  me  important,  that  the  thought  of  trying 
to  tell  the  story  in  the  brief  snatches  of  conversation 
that  I  might  hope  to  have  with  men  at  home  who 
ought  to  have  the  full  advantage  of  all  the  views  they 
can  obtain,  made  the  attempt  seem  hopeless.  And 
so  it  happened  that  while  I  had  not  once  had  the  idea 
of  trying  to  write  anything  for  the  public  at  the 
time  when  my  observations  were  being  made,  I 
reached  a  sudden  determination  to  attempt  to  put 
them  into  a  book.  Knowing  only  too  well  my  pov- 
erty in  leisure  hours  after  I  was  once  back  in  New 
York,  and  recognizing  if  the  book  were  written  my 
motto  would  have  to  be  "  Do  it  now,"  I  started  on 
the  task. 

From  title  page  to  finis,  every  line  was  dictated  in 
the  five  days  between  Southampton  and  Halifax. 
And  so  it  should  be  taken  for  what  it  is  —  a  quick 
review  following  an  extremely  interesting  experience 
in  observing  a  state  of  affairs  so  novel  that  the  whole 
world's  history  has  nothing  comparable  to  offer.  In 


PREFACE  ix 

no  sense  was  the  trip  planned  with  the  idea  of  making 
a  formal,  exhaustive  study  of  European  conditions. 
Hardly  a  note  was  made,  as  would  have  been  the  case 
had  there  been  in  mind  the  possibility  of  writing 
about  the  experience.  I  do  not  write  this  preface  as 
an  apology,  for  I  do  not  want  what  follows  to  be 
taken  so  seriously  that  an  apology  would  be  neces- 
sary either  for  what  is  said  or  for  what  is  left  unsaid. 
It  is  rather  the  sort  of  a  talk  I  might  give  to  a  friend 
who  cared  for  my  impressions  and  if  there  were  the 
opportunity  to  converse  at  sufficient  length. 

I  am  quite  aware  that  a  good  many  Americans  have 
been  in  Europe  during  the  same  period  that  these  ob- 
servations were  made  who  may  not  have  seen  the  situ- 
ation as  I  saw  it.  I  can  perfectly  understand  how 
one  might  have  traveled  the  same  rather  extensive 
route  that  I  followed,  and  have  concluded  the  journey 
gratified  at  the  normal  appearance  of  life  everywhere 
outside  of  the  war  zone.  Fields  are  being  plowed, 
grain  is  being  sowed  and  there  is  the  same  rolling 
beauty  of  landscape  with  the  same  lovely  rivers  and 
picturesque  villages  that  we  have  seen  in  former  years 
from  train  or  automobile  in  France.  Switzerland 
presents  the  same  neat  and  carefully  garnished  fields 
and  dooryards  in  its  agricultural  regions  that  has 
always  marked  it,  and  its  hills  are  unchanging. 
Italy  is  still  the  most  beautiful  place  in  all  the  world, 


x  PREFACE 

and  viewed  from  a  motor  along  still  perfect  moun- 
tain roads  or  seen  in  the  aspect  of  the  medievalism  of 
the  old  hill  towns,  it  seems  the  Italy  we  have  known 
before.  Spain  is  more  prosperous  in  its  obvious  as- 
pects than  has  probably  been  the  case  in  a  century. 
No  one  with  open  eyes  could  have  escaped  the  horrid 
marks  of  war  in  Belgium,  but  in  Holland  the  cattle, 
though  in  decreased  numbers,  grazed  placidly  as 
usual  and  the  great  tracts  of  tulips,  at  the  moment 
in  the  height  of  their  bloom,  made  one  feel  that  the 
world  had  not  lost  its  love  for  flowers  and  beauty. 

It  is  easy  to  understand  how  a  traveler,  seeing 
these  almost  normal  externals,  might  conclude  that, 
with  the  signing  of  peace,  Europe  was  almost  ready 
to  resume  its  old  life  in  the  old  way  and,  given  time 
to  heal  the  visible  wounds  of  war  along  the  battle- 
front,  would  again  be  the  Europe  we  used  to  know. 
And  so  if  there  are  r'e'turning  travelers  who  have  not 
seen  what  has  impressed  me,  I  shall  not  be  surprised 
nor  will  I  have  any  fault  to  find  if  they  describe  a 
Europe  exhibiting  little  change  from  pre-war  days. 

I  have  reached  what  to  me  are  some  startling  con- 
clusions. They  are  set  forth  in  what  follows  with 
such  fullness  as  was  possible  within  the  limits  of  the 
time.  If  they  were  only  my  own  conclusions,  there 
are  some  of  them  that  I  should  doubt  myself.  It  is 
hard  to  believe,  when  one  sees  what  is  outwardly  a 


PREFACE  xi 

perfectly  normal  country  with  its  people  quietly  mov- 
ing about,  apparently  fed  and  clothed  to  a  normal 
standard,  that  there  may  be  impending  a  catastrophe 
for  such  people  —  a  catastrophe  that  they  themselves 
do  not  dream  of  at  the  moment,  a  catastrophe  that 
may  be  marching  with  the  grim  certainty  that  marks 
tragedy.  But  this  catastrophe  may  be  averted  if 
statesmen  are  wise  enough  and  if  America  is  wise 
enough;  for  America  is  the  last  hope  of  Europe. 

America  must  be  brought  to  understand  what  has 
happened  to  Europe  and  be  filled  with  sympathy  but 
not  with  sympathy  alone,  for  charity  alone  cannot 
save  Europe.  America  must  understand  how  her 
own  fortunes  —  her  own  future  —  are  bound  up 
with  the  fate  of  European  civilization  and  that  Eu- 
ropean civilization  is  confronted  with  extreme  dan- 
gers. Without  America's  help,  the  catastrophe  can- 
not be  averted,  I  believe, —  but  by  America's  help  I  do 
not  mean  America's  charity.  If  once  we  grasp  the 
full  import  of  what  the  war  has  brought  to  Europe, 
at  once  we  see  what  vast  responsibilities  and  oppor- 
tunities the  war  has  brought  to  us.  I  believe  we  will 
place  ourselves  at  the  service  of  Europe  as  a  whole 
nation  just  as  we  threw  our  whole  national  strength 
into  the  task  of  saving  Europe  and  the  world  from 
military  domination.  Europe  is  now  to  be  saved 
from  a  financial  and  industrial  breakdown.  There 


xii  PREFACE 

are  possibilities  of  a  cataclysm  in  the  situation  and 
time  will  move  very  rapidly.  I  believe  much  of  the 
disaster  can  be  averted  but  that  can  only  be  done  if 
America  understands. 

I  have  said  that  I  might  doubt  my  own  conclusions 
if  I  had  reached  them  independently;  certainly  I 
would  not  venture  to  put  them  forth  on  a  printed 
page  if  they  were  but  my  own  conclusions.  They 
are,  in  fact,  the  essence  of  the  information  gained 
in  a  great  many  interviews.  In  what  follows  I  have 
directly  quoted  no  one.  It  would  be  unfair  to  do 
that  because  in  no  case  did  I  have  a  conversation 
when  I  had  in  mind  at  the  time  publishing  anything 
regarding  it,  and  certainly  the  people  with  whom  I 
talked  could  not  have  expected  that  I  was  interview- 
ing them  for  publication.  Nevertheless,  I  think  it  is 
fair  to  the  readers  of  this  book  that  they  should 
know  something  of  the  sources  of  my  information  be- 
cause that  may  help  them  to  put  a  value  on  my  con- 
clusions and  therefore  I  propose  to  give  a  list  of  some 
of  the  men  with  whom  I  have  had  full  opportunity  for 
a  serious  interchange  of  views. 

I  met  the  Finance  Ministers  of  all  the  Governments 
I  visited  except  Holland.  I  also  met  the  Finance 
Ministers  or  financial  representatives  of  Czecho-Slo- 
vakia,  Jugo-Slavonia,  Rumania,  Greece,  Lithuania 
and  Poland. 


PREFACE  xiii 

With  Mr.  Austin  Chamberlain,  it  was  the  renewal 
of  an  acquaintance  beginning  some  years  ago.  Like 
all  finance  ministers,  he  has  a  staggering  load  upon 
his  shoulders  but  I  found  no  man  in  England  who 
did  not  speak  with  words  of  high  respect  of  his  integ- 
rity of  mind,  of  his  honest  purposes  and  of  his  fine 
character.  Monsieur  Delacroix,  Finance  Minister  of 
Belgium,  is  also  Prime  Minister.  My  impression  of 
him  is  that  he  is  a  statesman  in  the  true  sense  of  the 
word,  well  trained,  high  minded,  capable.  I  met 
Monsieur  Klotz,  Finance  Minister  of  France.  Sig- 
nor  Stringer,  the  new  Finance  Minister  of  Italy,  had 
been  an  acquaintance  for  eighteen  years.  He  is  a 
trained  banker,  having  been,  I  do  not  know  how  much 
longer  than  that  period,  the  head  of  the  National 
Bank  of  Italy.  He  knows  the  technique  of  finance 
and  he  has  a  problem  that  will  fully  test  his  large 
abilities.  In  England,  I  met  Sir  Robert  Home,  Min- 
ister of  Labor,  and  Sir  David  Shackleton,  Permanent 
Secretary  to  the  Minister  of  Labor,  who  in  the  Labor 
Movement  is  familiarly  known  as  "  Honest  David  " 
and  who  is  regarded  by  the  present  Government  as 
one  of  the  finest  assets  that  the  civil  service  pos- 
sesses. In  my  whole  European  experience,  I  met  no 
one  who  looked  facts  more  squarely  in  the  face  than 
did  Sir  Auckland  Geddes,  Minister  of  Reconstruction, 
who  is  soon  to  give  up  public  life  to  take  the  head 


xiv  PREFACE 

of  a  Canadian  university.  I  had  an  interesting  talk 
with  the  Right  Honorable  George  H.  Roberts,  who, 
since  1917,  was  Minister  of  Labor  until  he  accepted 
from  the  present  Government  the  portfolio  of  Min- 
ister of  Food. 

Among  the  labor  people,  I  talked  with  Mr.  J.  H. 
Thomas,  M.  P.,  the  General  Secretary  of  the  Na- 
tional Union  of  Railway  Workmen,  who  represents  a 
union  of  more  than  500,000  workers.  He  is  a  states- 
man as  well  as  a  labor  leader.  He  has  twice  been 
offered  cabinet  positions  and  it  would  not  surprise 
me  if  some  day  he  headed  a  labor  cabinet.  I  talked 
also  with  Mr.  A.  Taylor  in  the  absence  of  Mr.  W.  A. 
Appleton,  the  head  of  the  General  Federation  of 
Trade  Unions.  Mr.  Taylor  is  next  to  Mr.  Appleton 
at  the  head  of  an  organization  of  over  half  a  million. 
I  found  him  one  of  the  most  patriotic,  most  moderate 
and  most  sensible  of  men  and  I  felt  at  the  end  of  an 
hour  as  if  I  had  been  listening  to  an  elevating  ser- 
mon. If  there  are  many  such  labor  leaders  in  Eng- 
land and  if  they  can  lead  their  followers,  I  have  little 
fear  of  how  far  the  labor  movement  there  will  travel. 
The  Right  Honorable  Arthur  Henderson  and  Pro- 
fessor G.  B.  H.  Cole  represented  the  more  radical 
view  of  the  men  who  are  not  at  one  with  the  present 
social  order  but  even  they  had  a  moderation  of  utter- 
ance and  such  a  tentative  character  of  program  as 


PREFACE  xv 

partially  to  disarm  fears  as  to  where  they  might  lead 
an  active  minority. 

I  met  the  two  active  heads  of  the  Government's 
employment  administration  —  Mr.  J.  W.  Philips  in 
charge  of  Unemployment  Insurance  of  the  Labor  Ex- 
change, who  is  disbursing  a  million  and  a  quarter 
pounds  a  week  to  the  unemployed,  and  Commander 
J.  B.  Adams,  R.  N.  R.,  General  Manager  of  the  Em- 
ployment Exchange  which  is  placing  in  positions 
6,000  men  a  day.  Commander  Adams  has  had  the 
interesting  experience  of  accompanying  Sir  Ernest 
Shackleton  to  the  South  Pole. 

Among  other  British  statesmen  with  whom  I  dis- 
cussed conditions  were  Lord  Milner,  Lord  Leverhulme 
(notable  as  a  great  employer  of  labor  advocating  a 
six-hour  day),  Lord  Revelstoke  and  Lord  Faringdon. 
Among  the  financial  people  in  the  city,  I  discussed 
conditions  with  Sir  Brien  Cokayne,  Governor  of  the 
Bank  of  England,  and  Montague  Norman,  Deputy 
Governor,  Sir  Edward  Holden,  Sir  Felix  Schuster, 
Lord  Inchcape,  Sir  Charles  Addis,  Sir  Robert  Kin- 
dersley,  head  of  the  National  War  Savings  movement, 
Sir  Robert  Vassar-Smith  and  Mr.  Henry  Bell. 

I  had  the  pleasure  of  dining  with  the  financial  edi- 
tors of  London:  Mr.  Hugh  Chisholm  (The  Times), 
Mr.  A.  W.  Kiddy  (Morning  Post),  Mr.  Ellis  T. 
Powell  (Financial  News),  Mr.  R.  J.  Barrett  (Finan- 


xvi  PREFACE 

tier),  Mr.  H.  Oakley  (Daily  Express),  Mr.  Walter 
W.  Wall  (Daily  Chronicle),  Mr.  F.  W.  Hirst  (Com- 
mon Sense),  Mr.  E.  R.  Macdermott  (Railway  News) 
and  including  the  master  of  lucid  exposition  in  eco- 
nomics, Hartley  Withers. 

In  France,  I  saw  various  members  of  the  present 
Government  as  well  as  M.  Briand  who,  many  think, 
will  succeed  M.  Clemenceau  in  due  course,  and  I  had 
several  conversations  with  one  of  the  ablest  of  French 
statesmen,  M.  Raoul  Peret,  President  of  the  Budget 
Committee  of  the  Chamber.  Of  course,  in  Paris  one 
sees  now  the  whole  world,  and  so  besides  French  offi- 
cials and  many  French  financiers,  I  met  the  premiers 
of  all  the  new  small  nations,  among  them  my  old 
friend,  Mr.  Paderewski,  and  a  most  attractive  new 
one,  Mr.  E.  C.  Venizelos  of  Greece.  Here,  too,  were 
many  important  men  from  England,  Italy  and  the 
Scandinavian  countries  and  I  had  the  opportunity  of 
comparing  notes  with  some  of  our  own  distinguished 
citizens,  including  Colonel  House,  General  Pershing, 
General  Bliss,  Mr.  Baruch,  Vance  McCormick, 
Thomas  Lamont  and  H.  P.  Davison. 

Without  wanting  to  make  any  invidious  compari- 
sons, I  cannot  refrain  from  saying  that  of  all  the 
men  I  met  in  Europe  I  obtained  the  greatest  amount 
of  information,  the  broadest,  most  statesman-like 
views,  the  finest  analysis  of  social  conditions  from 


PREFACE  xvii 

another  American  citizen,  Herbert  C.  Hoover.  I 
have  known  Mr.  Hoover  for  some  years  but  it  was 
not  until  I  had  some  long,  undisturbed  talks  with  him 
in  Paris  that  I  fully  appreciated  what  an  able  man 
he  is. 

This  list  is  already  growing  too  long  and  I  wish 
to  make  it  only  as  an  indication  of  my  sources  of 
information.  I  cannot  refrain,  however,  from  add- 
ing a  few  more  names.  In  Italy,  there  are  two  that 
stand  out  with  great  prominence,  Dr.  Pio  Pirelli,  and 
Comm.  Pio  Perrone,  the  head  of  the  Ansaldo  Com- 
pany. Their  story  is  told  elsewhere  in  this  book. 
Nor  in  Spain  must  I  neglect  to  mention  a  delightful 
hour  spent  with  His  Majesty  Alphonso  XIII. 
There,  too,  I  also  met  the  premier,  Count  Romanones, 
and  other  members  of  the  Government,  and  perhaps 
one  of  the  best  economic  minds  I  met  anywhere  in 
Europe,  Ex-Minister  Baldomero  Argente.  Nor,  in- 
deed, must  I  omit  the  mention  of  another  hour  with 
the  King  of  Montenegro  in  Paris  and  several  long 
talks  with  Dr.  G.  Vissering,  President  of  the  Na- 
tional Bank  of  the  Netherlands,  a  strong,  able  figure 
in  the  financial  life  of  Holland.  I  also  had  talks 
with  leading  Belgian,  Swedish  and  Norwegian  bank- 
ers and  financiers. 

I  had  the  privilege  of  comparing  notes  with  our 
own  Ambassador  to  Great  Britain,  Mr.  Davis,  our 


xviii  PREFACE 

Ambassador  to  Italy,  Mr.  Thomas  Nelson  Page,  our 
Ambassador  to  Spain,  Mr.  Willard,  our  Minister  to 
Belgium,  Mr.  Brand  Whitlock,  our  Minister  to  Swit- 
zerland, Mr.  Stovall,  our  Minister  to  Holland,  Mr. 
Garrett,  all  of  whom  I  have  to  thank  for  extreme 
courtesy  in  inviting  me  to  meet  distinguished  people 
and  in  aiding  me  in  every  way. 

The  list  could  be  much  extended.  I  do  not,  of 
course,  profess  that  all  of  these  people  would  agree 
with  all  of  my  conclusions,  but  I  think  I  can  fairly 
say  that  not  a  single  statement  is  made  in  this  book, 
or  a  single  conclusion  drawn,  that  could  not  be  sup- 
ported by  some  among  the  distinguished  company 
who  have  been  so  courteous  to  me. 


CONTENTS 

CHAPTER  PAGE 

PREFACE  —  FRANK  A.  VANDERLIP    .      ,      .     vii 

I     PARALYZED  INDUSTRY 1 

II     TRANSPORTATION 11 

III  A  CHAOS  OP  CURRENCIES 23 

IV  ENGLAND .31 

V     FRANCE 49 

VI  ITALY 57 

VII  SPAIN 68 

VIII  BELGIUM 80 

IX  THE  INTERNATIONAL  SCALE-PANS     ...     89 

X  CREDIT 98 

XI  "COMPORT  AND  LIBERTY" 113 

XII  AN  EMPLOYER'S  VISION 129 

XIII  THE  POWER  OF  MINORITIES 143 

XIV  THE  WORLD'S  FINANCIAL  CENTER     .      .      .158 
XV  AMERICA'S  OPPORTUNITY 166 

XVI     AN  INTERNATIONAL  LOAN  TO  EUROPE    .      .177 


WHAT  HAPPENED  TO 
EUROPE 

CHAPTER  I  ^^ 

PARALYZED    INDUSTRY 

I  WENT  abroad  to  learn  at  first  hand  something  of 
what  the  war  had  done  to  the  finances  of  Europe.  I 
had  gone  but  a  short  way  in  that  investigation  before 
I  perceived  that  there  was  something  far  more  fun- 
damental and  important  to  investigate  than  finances. 

Perhaps  nothing  worse  than  national  bankruptcy, 
with  its  attendant  results  can  happen  to  a  people.  I 
believe,  however,  that  something  more  far-reaching 
and  more  disastrous  than  mere  bankruptcy  has  hap- 
pened to  a  number  of  European  nations. 

The  most  profoundly  significant  thing  that  I 
sensed  in  Europe  is  the  disorganization  and  paralysis 
of  industrial  production.  The  paralysis  is  not  con- 
fined to  the  war  zone.  It  extends  to  the  industries  of 
the  neutral  countries.  So  long  as  it  continues,  there 
is  danger  of  revolutionary  development  and  of  Bol- 
shevik tendencies.  Wherever  unrest  develops  into 

I 


2          WHAT  HAPPENED  TO  EUROPE 

Bolshevism,  that  new  name  for  an  old  disease,  anar- 
chy, there  is  danger  of  contagion,  and  the  disease  is 
liable  to  spread  to  adjacent  territory.  This  makes 
it  necessary  to  regard  Europe  as  a  unit  in  any  fore- 
cast of  future  conditions,  for  no  government  is 
strongly  enough  fortified  against  the  inroads  of  this 
microbe  of  social  contagion  to  permit  its  future  to  be 
regarded  as  safe  when  its  neighbors  develop  this  type 
of  revolution. 

It  is  not  my  purpose  to  write  any  description  of 
the  war  front  or  any  detailed  account  of  what  has 
happened  to  industry  in  the  devastated  districts.  I 
motored  as  the  guest  of  the  American,  French,  and 
Belgian  governments,  throughout  the  whole  battle 
front  from  the  German  border  to  Zeebrugge.  It  is 
idle  to  attempt  to  picture  that  trip  to  any  one  who 
has  not  seen  what  the  desolation  of  war  really  means. 
There  is  a  -scar  across  France  and  Belgium  along 
which  devastation  is  complete, —  villages  that  are  just 
dust  heaps,  cities  in  which  not  a  building  remains, 
acres  of  land  permanently  despoiled  so  far  as  agri- 
cultural use  is  concerned. 

I  rode  for  many  miles  along  roads  which  had  been 
lined  with  magnificent  avenues  of -trees  seventy-five  or 
one  hundred  years  old.  These  had  all  been  felled, 
and  not  because  the  wood  was  needed.  For  over  two 
years  they  lay  where 'the  skillful  German  axe  and  saw 


PARALYZED  INDUSTRY  3 

had  put  them  —  destroyed  apparently  in  a  frenzy  of 
destruction. 

I  saw  broad  orchards  every  tree  in  which  had  been 
sawed  off  close  to  the  ground,  and  they  still  lay  there 
as  they  first  fell  in  pitiful  rows,  although  no  military 
engagement  had  taken  place  in  the  vicinity  to  give 
semblance  of  a  military  reason  for  the  act.  I  saw 
great  factories  in  the  occupied  district  of  Belgium 
that  had  been  operating  on  German  supplies  up  to  a 
few  days  before  the  armistice  and  which  were  outside 
the  range  of  active  military  operations,  which  were 
systematically  and  completely  destroyed,  chimneys 
toppled  over,  bombs  placed  in  every  boiler,  and  ma- 
chinery wholly  wrecked.  If  I  were  writing  a  book  on 
the  war,  I  would  devote  a  chapter  to  telling  about 
the  systematic  destruction  of  industry  for  solely  com- 
mercial purposes;  how  factories  were  selected  that 
were  competitive  to  German  industry  and  ruthlessly 
destroyed,  while  others  which  were  standing  near  by 
and  which  were  non-competitive  were  left  unharmed. 

In  a  sense,  Germany  has  won  one  of  her  objects. 
She  has  destroyed  the  industry  of  northern  France 
and  much  of  the  industry  of  Belgium,  so  that  no 
matter  how  great  or  in  what  form  indemnity  is  se- 
cured, these  industries  cannot  be  replaced  before  sim- 
ilar German  industries,  and  the  industries  of  other 
countries,  may  have  absorbed  their  markets. 


4          WHAT  HAPPENED  TO  EUROPE 

In  picturing  the  devastating  effect  of  war  on  Eu- 
ropean industry,  however,  one  must  not  confine  the 
view  to  the  Hindenburg  line.  There  were  great  in- 
dustries in  Poland  completely  destroyed.  In  East 
Poland  there  is  a  tract  of  land  two  hundred  miles 
broad  and  four  hundred  miles  long  where  the  Rus- 
sian armies  decided  so  to  devastate  the  country  that 
the  German  armies  could  not  follow  them.  There 
the  houses  were  of  wood,  and  all  were  burned.  The 
Russian  army  endeavored  to  evacuate  the  country  of 
the  whole  population,  and  the  population  started  to- 
ward Russia  in  advance  of  the  retreating  Russian 
army.  The  retreating  Russian  army  traveled  faster 
than  the  refugees  and  marched  through  them.  Then 
the  pursuing  German  army  pressed  on  and  marched 
over  these  people.  They  were  left  without  food, 
clothing,  or  shelter.  Four  hundred  thousand 
starved.  To-day  that  great  territory,  the  size  of 
Kansas,  is  barren  and  without  means  of  sustaining 
life.  The  industry  of  Warsaw  was  systematically 
sacked,  as  was  that  of  most  cities  on  the  eastern 
front. 

As  one  moves  further  south  the  situation  be- 
comes little  better.  Few  cities  in  Europe  have  had  to 
endure  a  more  terrible  fate  of  starvation  than 
Prague.  In  Hungary,  Bolshevism  has  done  what 
Militarism  failed  to  do.  In  Rumania,  a  purely  agri- 


PARALYZED  INDUSTRY  5 

cultural  country,  there  were  left  almost  no  cattle  or 
farm  machinery.  Both  in  Poland  and  in  Rumania 
not  over  one-third  of  the  fields  will  be  planted  this 
year.  Rumania  is  one  of  the  great  sources  of  grain 
exports  to  other  countries  of  Europe.  Her  exporta- 
tion prior  to  the  war  was  100,000,000  bushels,  includ- 
ing wheat,  barley,  rye,  oats,  corn  and  millet.  The 
Premier  of  Rumania  told  me  that  under  the  best  of 
crop  conditions  Rumania  would  be  able  to  raise  this 
year  only  a  sufficient  amount  of  food  for  her  own  pop- 
ulation. Serbia  was  utterly  despoiled.  There  is 
choice  irony  in  her  railroad  statistics.  After  the 
armistice  there  were  nine  locomotives  in  Serbia. 

This  horrible  story  of  destruction,  however,  I 
speak  of  only  to  minimize  its  extent  by  comparison. 
Vast  as  has  been  the  field  of  destruction,  these  devas- 
tated ar^as  are  but  scars  on  the  face  of  Europe,  and 
in  the  main  the  great  intricate,  complicated  industrial 
machine  of  Europe  was  stimulated  and  expanded  by 
this  war  which  was  so  truly  a  war  of  industries. 
If  it  were  possible  to  show  the  exact  percentage  of 
the  industrial  life  of  Europe  which  has  been  sacrificed 
with  shell,  bomb,  and  incendiary  torch,  it  would  be 
seen  that  the  destruction,  vast  as  it  is,  bears  no 
overwhelming  relation  to  the  whole. 

Why,  therefore,  should  not  these  industries  which 
have  been  unharmed  be  set  going  at  a  speed  they 


6          WHAT  HAPPENED  TO  EUROPE 

never  knew  before  in  order  to  meet  the  insistent  de- 
mand that  the  illimitable  needs  of  Europe  may  be  ex- 
pected to  create?  The  fact  is,  that  in  the  face  of 
these  illimitable  needs  the  industry  of  all  Europe 
stands  paralyzed.  What  is  it  that  has  laid  its  hand 
on  industry  and  at  the  moment  when  industry's 
products  are  needed  as  they  were  never  before  needed 
in  the  world  has  put  out  the  fires,  turned  off  the 
power,  and  left  industry  idle? 

The  answer  cannot  be  made  in  a  sentence.  There 
is  a  tragic  combination  of  difficulties  that  has 
brought  this  about.  I  will  try  to  enumerate  a  few 
of  these,  and  let  any  American  manufacturer  try  to 
imagine  his  plant  faced  with  such  a  series  of  diffi- 
culties and  answer  if  he,  too,  would  not  have  found 
them  too  great  quickly  to  surmount.  Let  us  pass  by 
the  case  of  these  industries  in  the  devastated  dis- 
tricts. Obviously,  their  situation  alone  makes  an 
early  restoration  of  work  quite  out  of  the  question. 
Let  us  take  as  an  example  an  unharmed  industrial 
plant  in  any  place  located  in  the  interior  of  any  one 
of  several  countries.  We  must  first  recollect  that 
domestic  transportation  is  broken  down.  This  is 
substantially  true  of  all  Europe.  It  is  literally  true 
in  many  districts,  but  even  where  the  service  is  best, 
days  and  weeks  are  consumed  in  moving  freight  short 
distances. 


PARALYZED  INDUSTRY  7 

Then  the  factory  must  have  raw  materials,  and  in 
most  cases  these  materials  must  come  from  outside 
the  country.  Over  great  regions  a  military  embargo 
still  continues  and  raw  material  could  not  be  shipped 
if  it  could  be  obtained.  To  obtain  it,  there  must  be 
arranged  in  many  cases  ocean  transportation,  and 
ocean  tonnage  is  so  scarce  that  ships  sometimes 
make  one-half  their  pre-war  value  out  of  receipts  of 
a  single  round  trip.  But  if  tonnage  can  be  secured 
and  military  embargoes  do  not  interfere,  there  is 
then  the  difficulty  of  exchange  and  the  practical 
impossibility  of  credit.  All  the  continental  nations 
are  controlling  imports  with  a  strong  hand  because 
every  ton  of  material  that  is  bought  outside  of  the 
country  increases  the  difficulties  of  the  government 
in  handling  the  foreign  exchange  situation. 

So  the  manufacturer  must  first  obtain  an  import 
license,  which  is  always  a  tedious  process  and  fre- 
quently a  difficult  one.  After  he  has  permission 
to  import  raw  material  he  must  secure  the  foreign 
funds  necessary  to  pay  for  it.  Suppose  he  has 
done  all  this  and  has  surmounted  the  difficulties 
of  ocean  and  land  transportation;  he  is  then  ready 
to  start  his  mill.  It  may  be,  if  it  is  located  in 
Italy,  for  example,  that  he  can  get  no  coal.  In 
any  event,  the  price  of  coal  and  the  difficulty  of 
getting  it  regularly,  together  with  the  difficulty  of 


8          WHAT  HAPPENED  TO  EUROPE 

transporting   it   in   sufficient   quantities,   will   be   a 
serious  handicap. 

Then  comes  the  labor  situation,  and  although 
every  manufacturer  is  surrounded  by  idleness,  in 
few  cases  is  his  labor  market  favorable.  If  his 
product  is  one  that  requires  special  skilled  labor  he 
finds  that  his  former  labor  force  has  drifted  away 
and  is  difficult  to  replace.  Always  the  increased 
cost  of  living  and  the  idea  which  is  universal,  that 
labor  shall  have  in  the  future  a  larger  share  in  the 
profits  of  production,  makes  his  new  wage  scale 
somewhere  from  two  to  three  times  his  pre-war  scale, 
while  all  over  Europe  the  demand  for  a  shorter  day 
is  adding,  at  least  in  the  opinion  of  many  manufac- 
turers, to  the  labor  cost  of  production. 

But  now  suppose  that  the  manufacturer  has  sur- 
mounted all  these  difficulties  and  has  actually  started 
the  production  of  his  product.  There  then  comes 
the  difficulty  of  his  market.  He  again  faces  the 
obstacle  of  broken-down  transportation.  If  his 
market  had  previously  been  in  the  Balkans,  the  Near 
East,  or  countries  along  the  Eastern  Front,  the 
transportation  problem  is  at  present  unsolvable. 
The  difficulties,  even  of  transportation  of  mail,  are 
unbelievably  great,  and  bad  as  the  mail  service  is, 
it  is  frequently  speedier  than  the  telegraph.  This  is 
no  extravagant  figure  of  speech;  it  is  a  plain  state^ 


PARALYZED  INDUSTRY  9 

ment  of  conditions  that  are  so  widespread  as  to  be 
typical. 

But  suppose  the  manufacturer  has  at  last  pro- 
duced his  goods  and  has  got  in  touch  with  his  pro- 
spective customers.  If  these  customers  are  in  Spain, 
France,  Holland,  or  the  Scandinavian  countries, 
they  probably  have  means  to  pay  for  what  they  want 
to  buy.  If  the  customers  are  elsewhere  in  Europe 
the  credit  questions  involved  will  be  extremely 
serious ;  and  so  far  as  Poland,  Lithuania,  Rumania, 
and  the  Balkan  countries  are  concerned,  nothing  but 
credits  will  complete  the  transaction.  The  credits 
asked  are  not  short.  They  are  too  large  and  too 
long  for  any  manufacturer  to  undertake  to  carry 
himself.  They  are  not  of  a  character  which  permits 
them  to  be  handled  as  banking  transactions.  And  so 
there  is  going  on  a  chaotic  scramble  of  the  repre- 
sentatives of  all  these  small  countries  to  create  credits 
in  any  form  which  will  pay  for  goods  they  so  urgently 
need.  Thus  we  see  a  situation  where  the  need  of 
goods  is  practically  without  limit,  but  the  difficulties 
surrounding  their  production  and  marketing  are  so 
great  that  up  to  the  present  time  there  is  a  condition 
of  idleness  unprecedented  in  industrial  history. 

The  picture  that  has  been  drawn  of  the  difficulties 
that  manufacturers  are  facing  may  seem  to  be 
extravagant  and  overdrawn.  Not  all  manufacturers 


10        WHAT  HAPPENED  TO  EUROPE 

face  all  these  difficulties,  but  the  picture  is  not 
extravagant  or  overdrawn  if  taken  as  a  general  indi- 
cation of  the  state  of  industry  in  Europe  to-day. 
The  great  obstacles  are  the  difficulties  of  obtaining 
credits  to  purchase  in  foreign  markets,  the  inability 
to  get  ocean  tonnage,  the  breakdown  of  domestic 
transportation,  labor  unrest,  and  throughout  the 
great  war  area  the  destruction  of  machinery. 
Machinery,  raw  materials,  and  railroad  equipment 
are  the  main  things  that  Europe  needs  and  must  have 
to  restart  the  industrial  processes.  To  secure  these 
it  is  necessary  to  obtain  in  the  aggregate  vast 
foreign  credits. 

I  believe  there  can  be  no  secure  peace  until  the 
way  is  found  to  supply  these  credits  to  all  industrial 
centers.  It  will  not  do  to  pick  out  only  those  dis- 
tricts or  those  industries  which  may  seem  to  offer 
the  best  security,  for  there  will  be  security  nowhere 
as  long  as  there  are,  here  and  there,  plague  centers 
in  which  idleness,  lack  of  production,  disorganized 
transportation,  want  and  hunger  make  a  breeding 
ground  for  the  Bolshevik  microbe. 


CHAPTER  II 

TRANSPORTATION 

IF  there  were  nothing  else  the  matter  with  Europe 
except  the  breakdown  of  railway  transportation, 
most  of  the  European  nations  would  still  be  facing 
a  problem  of  gigantic  proportions,  the  early  settle- 
ment of  which  is  not  only  essential  to  the  resumption 
of  industrial  life,  but  is  actually  essential  to  main- 
taining life  itself  in  some  of  the  large  centers.  Hun- 
dreds of  thousands  of  people  have  starved  to  death 
in  the  last  twelve  months  in  Europe.  I  am  not  using 
figures  as  it  is  said  Lloyd  George  does,  merely  as 
adjectives.  There  is  competent  authority  for  such 
a  statement.  This  terrible  catastrophe  has  only  in 
part  been  caused  by  lack  of  food.  In  an  import- 
ant measure  the  disaster  was  directly  traceable  to 
the  breakdown  in  transportation,  to  the  physical 
inability  to  move  stores  of  existing  food  into  locali- 
ties where  people  were  dying  of  starvation.  At  one 
time  there  were  a  hundred  unloaded  cargoes  of  food 
in  the  harbor  of  Marseilles,  held  there  because  pre- 
ceding cargoes  were  blocking  the  lines  of  trans- 
portation. 

11 


12        WHAT  HAPPENED  TO  EUROPE 

The  railroads  of  Spain  were,  on  the  whole,  in  much 
better  condition  than  I  expected  to  find  them.  In 
France  the  system  has  wonderfully  stood  the  test  of 
the  enormous  movement  which  has  been  imposed  upon 
it.  But  equipment  is  deficient,  and  much  of  it 
unbelievably  ancient.  Added  to  that  is  the  ineffec- 
tual system  of  handling  the  traffic.  One  of  our  high 
military  officers  described  the  dispatching  of  a  freight 
car,  say  from  Brest  to  Paris,  as  comparable  with 
dropping  a  letter  •  in  a  mail  box.  Sometime,  pre- 
sumably, the  car  would  arrive  at  its  destination,  but 
in  the  meantime  there  was  no  record  of  its  where- 
abouts. No  matter  how  important  it  was  to  have  it 
reach  its  destination,  no  way  existed  to  trace  it,  and 
it  might  get  lost  on  a  side  track  for  a  month.  The 
situation  in  France  or  even  in  Belgium  is  by  no  means 
illustrative  of  the  situation  further  east.  It  is  true 
that  in  Belgium  the  Germans  took  up  practically  all 
double  track,  even  on  the  principal  main  through  lines 
and  have  left  but  a  single  track  for  all  traffic. 
Literally  hundreds  of  masonry  bridges  have  been 
destroyed  in  Belgium  and  northern  France.  It  is 
easy  to  say  that  all  this  damage  can  be  readily 
repaired,  and  so  it  can  in  time.  My  point  is  that  it 
has  not  been  repaired  and  at  the  present  moment 
the  tremendous  handicap  resulting  from  an  inability 
promptly  to  move  freight  would  alone  be  an  enor- 


TRANSPORTATION  13 

mously  disorganizing  factor  to  the  industrial  life  of 
these  countries. 

As  one  goes  further  east,  however,  the  transporta- 
tion system  is  found  to  be  far  more  seriously  disor- 
ganized. It  is  true  that  there  has  now  been  estab- 
lished some  through  services  that  might  be  taken  to 
indicate  a  return  to  normal  railroading  conditions. 
One  can  travel  from  Paris  to  Warsaw,  or  to  Belgrade, 
Bucharest  or  Constantinople.  When  it  comes  to 
transporting  freight  through  the  whole  district 
east  and  south  of  Germany  and  of  old  Austria- 
Hungary,  the  situation  assumes  serious  aspects. 
Serbia  was  swept  almost  clean  of  all  railway  equip- 
ment. I  was  told  that  at  the  date  of  the  armistice 
there  were  but  nine  locomotives  left  in  Serbia.  The 
situation  is  bad  in  Greece  as  well  as  in  Rumania, 
Czecho-Slovakia,  Poland  and  Lithuania.  In  Russia 
the  locomotives  seem  to  have  been  run  until  they 
ceased  to  function  and  then  were  deserted,  little  if 
any  effort  being  made  at  repairs,  and  it  is  here  that 
there  are  the  most  notable  examples  of  starvation  and 
ample  food  supplies  not  distantly  separated. 

I  have  the  highest  possible  authority  for  the  pre- 
diction that  the  food  situation  will  be  more  serious 
in  the  spring  and  summer  of  1920  than  it  has  been 
this  year,  and  indeed  that  it  will  be  so  serious  that, 
taking  into  account  the  breakdown  of  transportation, 


14        WHAT  HAPPENED  TO  EUROPE 

it  will  be  impossible  to  prevent  another  horror  of 
starvation  even  if  the  ports  of  Europe  are  amply 
supplied  with  food.  I  am  not  arguing  that  this 
whole  situation  cannot  be  readily  put  to  rights,  but 
I  do  say  that  no  substantial  start  has  yet  been  made 
to  do  so,  that  even  no  systematic  plan  has  yet  been 
developed,  and  that  under  the  very  best  of  conditions, 
the  task  is  one  that  will  consume  a  great  deal  of 
time.  In  the  interval  the  transportation  situation 
presents  a  most  serious  obstacle  to  the  distribution  of 
food  and  necessities,  and  makes  doubly  difficult  the 
restarting  of  industry.  Among  all  of  Europe's 
needs,  none  is  more  poignant  than  the  rehabilitation 
of  her  railroads. 

Occasionally  I  had  an  interview  that  was  so  rich 
in  material  and  that  was  given  under  such  circum- 
stances that  I  could  make  very  brief  running  notes. 
I  find  in  my  notebook,  which  indeed  is  a  lamentably 
scanty  and  scrappy  one,  the  notes  of  an  interview  I 
have  had  with  a  man  who  has  made  a  great  success 
on  two  continents  and  knows  thoroughly  from  per- 
sonal experience  the  railroad  conditions  in  America, 
England  and  in  Europe,  and  who  has  rendered  dis- 
tinguished service  throughout  the  war.  My  talk 
with  him  ranged  over  many  subjects.  Portions  of 
the  interview  would  logically  fall  in  various  chapters 
of  this  book,  but  perhaps  it  will  be  as  interesting 


TRANSPORTATION  15 

and  readable  to  try  to  give  an  outline  of  what  he  had 
to  say  without  any  attempt  at  logical  arrangement. 

"  In  France  the  railroad  tariff  is  fixed  by  law.  It 
is  now  admittedly  too  low,  but  there  has  been  an 
indisposition  materially  to  increase  it,  just  as  there 
has  been  an  indisposition  materially  to  increase  taxes. 
The  result  is  -a  sad  deficiency  in  income  and  a  serious 
decline  in  the  physical  condition  of  the  rolling  stock. 
The  French  railroads  seem  never  to  scrap  rolling 
stock.  I  have  seen  a  locomotive  regularly  running 
on  a  French  railroad  that  bore  the  date  1857  on  its 
nameplate.  That  locomotive  would  be  in  a  museum 
in  America.  Its  boiler  tubes  were  all  of  copper.  It 
is  to-day  in  regular  operation.  The  way  in  which 
France  has  conserved  its  old  rolling  stock  makes  me 
wonder  if  Americans  have  not  gone  mad  on  rebuild- 
ing railroads. 

"  Economical  as  is  the  management  of  the  French 
lines,  their  income  at  the  present  too  low  rates  is 
not  sufficient  to  keep  up  properly  their  physical  con- 
dition. The  Allies  have  paid  the  Nord  Railway  three 
million  pounds  on  account,  and  that  is  all  that  has 
kept  the  road  going.  The  finances  of  all  the  French 
roads  are  bad. 

"  In  France  a  tremendous  amount  will  have  to  be 
spent  to  restore  the  railroads  to  a  good  physical 
condition.  The  problem  is  by  no  means  insurmount- 


16        WHAT  HAPPENED  TO  EUROPE 

able,  but  France  will  have  to  put  up  rates.  Every- 
thing that  a  railroad  buys  has  gone  up  and  there 
must  be  an  advance  in  the  price  of  what  it  has  to 
sell.  If  the  French  railroad  managers  would  only 
introduce  some  kind  of  efficiency,  if  they  would  learn 
to  do  some  things  in  the  way  they  have  seen  them 
done  under  American  and  English  direction,  their 
position  would  be  much  easier.  I  think  after  the 
Americans  and  English  have  gone  home  the  French 
will  introduce  a  better  system,  but  they  dislike  to  do 
that  under  the  eyes  of  the  foreigners. 

"  In  England  an  extraordinarily  happy  arrange- 
ment was  made  at  the  very  outbreak  of  the  war. 
The  British  Government  took  over  95  per  cent,  of 
the  railroad  lines,  guaranteeing  them  the  same  net 
return  as  they  made  in  1913.  The  government 
allows  the  same  amount  to  be  spent  on  upkeep  and 
charged  to  operating  expenses  as  was  spent  in  1913, 
plus  20  per  cent.,  the  80  per  cent,  being  allowed  to 
cover  the  increased  cost  of  material  and  labor. 
There  was  so  much  difficulty  in  getting  labor  that 
one  million  pounds  of  this  upkeep  fund  is  unexpended. 

"  The  passenger  rates  in  England  were  increased 
50  per  cent.,  not  so  much  to  get  additional  revenue 
as  to  prevent  travel.  Freight  rates  were  not  materi- 
ally raised.  Much  traffic  that  had  formerly  moved 
by  water  had  to  be  moved  by  rail,  and  this  made  new 


TRANSPORTATION  17 

tariffs  necessary  and  increased  the  business  of  the 
railroads.  There  was  formed  a  Railroad  Executive 
Committee,  made  up  of  eleven  or  twelve  managers. 
The  President  of  the  Board  of  Trade  was  the  nominal 
head,  but  he  was  not  active.  No  conclusion  was  put 
into  force  without  the  unanimous  consent  of  this 
Executive  Committee.  They  were  broad-minded  in 
their  attitude  and  did  not  hamper  the  government, 
and  the  result  is  that  there  has  been  built  up  no 
controversy  between  the  government  and  the  man- 
agers. 

"  In  an  unguarded  moment,  the  Government 
promised  the  unions  that  it  would  sympathetically 
consider  an  eight  hour  day.  With  the  armistice  the 
unions  immediately  came  forward  and  demanded  an 
eight  hour  day  at  once.  Lloyd  George,  Sir  Albert 
Auckland,  Stanley  Geddes  and  Sir  Herbert  Walker 
all  made  promises  before  election  that  are  now  diffi- 
cult to  carry  out.  During  the  war  hours  ranged 
from  ten  to  twelve  a  day,  and  sometimes  there  were 
cases  of  men  working  sixteen  hours  a  day.  An  eight 
hour  day  would  add  £25,000,000  annually  to  the 
operating  expenses.  The  present  increase  of  wages 
over  the  pre-war  total  is  £55,000,000,  so  that  if  an 
eight  hour  day  is  granted  on  top  of  the  present 
wages,  the  operating  costs  for  labor  alone  will  be 
£80,000,000  more  than  prior  to  the  war.  Standard- 


18        WHAT  HAPPENED  TO  EUROPE 

ization,  cooperation  and  the  operation  of  all  the 
roads  as  one  system  will  save  about  £15,000,000  per 
annum,  leaving  £55,000,000  to  be  met  by  increased 
rates.  Railway  economists  agree  that  this  cannot  be 
done.  It  means  doubling  the  expense.  Winston 
Churchill  before  election  promised  nationalization. 
His  unauthorized  promise  was  not  denied  until  after 
the  election.  Now  England  is  to  have  a  new  Minis- 
try of  Ways  and  Transportation,  but  as  yet  no  defi- 
nite government  policy  has  been  announced. 

"  The  English  public  is  divided  upon  the  subject 
of  nationalization.  The  subject,  however,  is  not  so 
complicated  as  it  is  in  America.  The  difference 
between  the  railroad  situation  in  the  United  States 
and  in  England  lies  in  the  fact  that  there  is  no 
vindictiveness  in  England  between  the  Government, 
the  railways  and  labor.  There  has  been  no  such 
acts  in  England  as  the  taking  away  of  private  cars, 
or  the  reducing  of  salaries  of  managers.  The 
English  public  always  stands  for  fair-play.  *  Is  it 
cricket  ?  '  is  a  question  ever  in  the  minds  of  Eng- 
lishmen. In  America  the  policy  of  legislators  and 
of  the  Interstate  Commerce  Commission  has  often 
been  vindictive.  England  will  probably  be  slow  in 
making  its  final  decision  in  regard  to  the  railroads. 
It  is  the  habit  there  to  consider  public  questions 
carefully ;  but  in  the  end  it  will  be  fairly  considered 


TRANSPORTATION  19 

and  the  owners  of  railroad  securities  will  be  treated 
fairly. 

"  Personally,  I  think  the  government  ought  to  get 
out  of  the  railroad  business.  Political  influences  will 
always  hamper  its  policy  of  management.  I  doubt 
if  railroads  can  ever  be  publicly  run  successfully  in 
a  democracy,  although  perhaps  they  can  in  an 
autocracy. 

"  I  have  been  spending  some  time  in  Belgium.  You 
can  discount  somewhat  the  Belgian  hard  luck  stories. 
The  Belgian  is  inclined  to  exploit  his  misery.  It  is 
true  that  certain  towns  were  wiped  out,  but  all  were 
not.  Belgian  agriculture  is  better  than  it  was  before 
the  war.  The  Belgian  children  have  been  well-fed. 
Keep  an  eye  on  Belgium.  Her  industries  may  revive 
first  in  Europe,  and  she  has  great  ability  in  the 
industrial  field. 

"  Here  in  France  industry  is  handicapped  in  many 
ways.  The  Frenchman  is  jealous  and  suspicious  of 
his  neighbors.  He  is  an  individualist  and  does  not 
like  to  cooperate.  The  genius  of  the  French  is  for 
small  business.  They  do  not  want  Americans  or 
English  to  come  in  to  do  business  in  France.  That 
policy  is  undoubtedly  a  mistake.  They  ought  to 
welcome  the  energy  and  brains  of  outsiders  who  would 
help  them  to  get  going.  There  has  been  enough 
altruism  and  amateur  charity  in  regard  to  France. 


20        WHAT  HAPPENED  TO  EUROPE 

What  France  ought  to  do  is  to  let  capital  and  brains 
flow  in  and  give  vitality  to  her  whole  industrial  life. 
She  should  do  away  with  her  restrictions.  But,  in 
fact,  she  has  become  more  Chauvinistic  than  ever. 
Do  not  be  deceived,  however,  by  the  possibility  of 
recovery  in  France.  France  has  been  very  sick,  but 
there  is  nothing  wrong  with  her  constitution. 
Foreigners  can  do  business  in  France,  if  they  will 
only  learn  how  to  go  about  it.  Americans  par- 
ticularly do  not  know  how  to  deal  with  Frenchmen. 
Americans  are  too  direct  and  too  blunt.  No  French- 
man wants  to  talk  business  in  the  first  interview,  and 
much  of  the  business  of  France  is  done  by  indirection. 
One  must  take  time  to  find  out  where  the  lines  lie 
and  in  direct  contact  never  take  a  Frenchman  too 
seriously.  The  field  of  industry  in  France  would  be 
difficult  for  an  outsider,  but  in  the  field  of  finance 
there  is  unlimited  opportunity. 

"  You  ask  what  America  should  be  doing  in 
Europe.  Europe  is  fairly  crying  for  brains  and 
capital.  There  are  possibilities  everywhere,  and 
there  are  particular  possibilities  in  some  of  the 
by-ways  of  Europe  that  capital  does  not  think  of. 
Portugal  is  one.  Clear-sighted  engineers  with  a 
business  sense  would  find  many  opportunities  in  Por- 
tugal, and  in  Spain.  There  are  great  mineral 
resources  there  and  an  excellent  climate. 


TRANSPORTATION  21 

"  One  of  the  old  regions  of  the  world,  Mesopotamia, 
will  be  made  to  flourish  like  a  green  bay  tree  if  a 
little  capital  and  some  brains  would  get  hold  of  the 
situation  and  revive  the  irrigation  system  of  ages 
ago.  In  the  Balkans  and  in  the  East  there  are  coal 
and  oil  to  be  developed.  In  Rumania  there  are 
mineral  and  agricultural  possibilities.  The  Germans 
made  no  mistake  in  selecting  the  Near  East  as  a 
place  for  investment.  They  organized  banks  there, 
and  the  banker  did  not  take  chances.  He  knew  what 
he  was  about.  There  is  a  banking  vacuum  from 
the  Adriatic  east. 

"  If  America  will  study  these  opportunities  and 
will  link  imagination  with  an  actual  knowledge  of 
existing  conditions,  she  can,  with  her  ways  of  dealing 
with  things,  make  a  new  world  out  of  these  backward 
countries.  The  greatest  export  America  could  send 
to  those  countries  would  be  men  with  a  knowledge 
of  construction,  of  finance  and  of  management. 
These  countries  have  had  bad  government  so  long 
that  there  is  no  impetus  left  in  the  native  people  and 
they  have  made  no  progress,  in  spite  of  having 
natural  resources  that  would  have  supported  great 
development.  The  course  for  America  to  follow  is, 
first,  to  investigate,  to  prospect,  then  to  construct, 
retaining  an  interest  in  the  junior  securities,  and 
keeping  the  operation  in  their  own  hands.  There  is 


22        WHAT  HAPPENED  TO  EUROPE 

an  enormous  field  for  profit  to  Americans  and  for 
service  to  these  people." 

There  seems  to  me  much  sound  suggestion  in  this 
interview,  as  well  as  informing  discussion  of  the  Euro- 
pean railroad  situation. 


CHAPTER  III 

A    CHAOS    OF    CURRENCIES 

AN  important  factor  contributing  to  the  present 
commercial  disorganization  of  Europe  is  to  be  found 
in  the  situation  of  the  currencies  of  the  various 
nations.  The  chaos  in  the  circulating  medium  is 
enough  to  make  Europe  seem  like  an  economic  mad- 
house. The  very  first  days  of  the  war  saw  experi- 
ments in  currencies  by  the  greatest  countries  which 
departed  from  all  experience  and  disregarded  in 
many  cases  all  sound  principles.  England  itself  in 
the  first  days  of  the  war  had  to  resort  to  a  fiat  issue 
by  the  government.  Gold  which  was  the  general 
medium  of  exchange  aside  from  the  Bank  of  Eng- 
land notes,  disappeared  from  circulation  overnight. 
The  Bank  of  England  had  a  rigidity  in  its  circulation 
that  permitted  no  elasticity,  and  the  government  was 
forced  to  begin  the  printing  of  fiat  notes  before  suit- 
able paper  could  be  found  or  adequate  plates 
engraved.  To-day  the  amount  of  government  notes 
outstanding  in  Great  Britain  amounts  to  more  than 
one  and  a  half  billion  dollars.  Against  this  there  is 

23 


24        WHAT  HAPPENED  TO  EUROPE 

held  a  special  deposit  of  gold  amounting  to 
£28,500,000  or  roughly  $140,000,000.  Theoret- 
ically the  notes  are  redeemable  in  gold.  Practi- 
cally the  holder  of  either  these  notes  or  the  notes 
of  the  Bank  of  England  would  be  so  closely  ques- 
tioned in  regard  to  the  use  he  intended  to  make 
of  the  gold,  if  he  demanded  their  redemption  in 
gold,  that  their  redemption  quality  is  for  the  pres- 
ent a  fiction.  No  one  is  permitted  to  export  gold 
from  England  without  a  Government  license,  and 
that  license  in  fact  is  not  granted.  A  bank  deposit 
in  England  is  payable  only  in  Bank  of  England 
notes  or  the  Government  currency  notes,  and  as  these 
notes  will  not  be  redeemed  in  gold  on  demand,  the 
pound  sterling  has  ceased  to  represent  gold. 

In  France  the  sole  national  issue  of  circulating 
notes  are  those  of  the  Bank  of  France.  The  out- 
standing issue  of  these  notes  of  the  Bank  of  France 
has  gone  up  from  about  six  billion  francs  before  the 
war  to  over  thirty-four  billion,  with  the  limit  of 
authorization  just  raised  to  thirty-nine  billion.  The 
notes  are  at  present  irredeemable  and  all  gold  has 
disappeared  from  circulation. 

It  is  well  to  -stop  a  moment  and  translate  these 
figures  so  that  our  minds  can  grasp  their  significance. 
The  circulation  of  the  Bank  of  France  now  amounts 
roundly  to  six  and  a  half  billion  dollars.  France 


A  CHAOS  OF  CURRENCIES  25 

has  a  population  of  about  39,700,000.  This 
gives  an  average  amount  of  circulation  per 
capita  of  roundly  $166.  Our  own  circulation  is 
$5,863,288,000,  or  $54.64  per  capita.  France  with 
its  39,700,000  of  people  and  its  area  less  than  that  of 
our  South  Atlantic  States  has  three-quarters  of  a 
billion  dollars  more  circulation  than  we  have  in  the 
United  States. 

While  the  notes  of  the  Bank  of  France  are  the  only 
national  circulation  and  the  only  legal  tender,  there 
has  been  issued  by  many  of  the  towns  of  France 
through  the  local  Chambers  of  Commerce,  circulating 
notes  of  small  denomination. 

In  Italy  circulation  consisted  of  notes  of  the  three 
great  banks  of  issue,  the  Bank  of  Italy,  the  Bank  of 
Naples  and  the  Bank  of  Sicily.  Before  the  war  the 
Italian  note  circulation  was  1,730,100,000  lire. 
To-day  it  is  8,961,300,000  lire. 

In  Belgium  the  pre-war  circulation  consisted  of 
the  notes  of  the  National  Bank  of  Belgium.  When 
the  German  Government  came  into  Brussels  they  were 
not  in  a  position  to  command  a  further  issue  by  the 
National  Bank,  but  they  compelled  the  leading  com- 
mercial bank,  the  Societe  Generale,  to  put  out  an 
issue.  The  volume  of  this  issue  grew  to  large  figures, 
but  large  as  it  was  it  was  supplemented  by  issues  by 
every  town  of  importance  in  Belgium.  I  have  seen  a 


26 

collection  of  these  issues  of  Belgian  and  French  city 
currency  which  filled  two  large  scrap  books  of  per- 
haps a  hundred  pages  each,  each  page  of  which  was 
covered  with  an  endless  variety  of  notes.  One  of 
these,  for  which  the  ingenious  and  patriotic  artist 
who  designed  it  was  subsequently  lodged  in  a  Ger- 
man jail,  had  on  the  back  an  outline  sketch  of  a  lion 
whose  tongue  protruded  contemptuously.  It  was 
discovered  by  the  German  authorities  after  many  of 
these  were  in  circulation  that  the  lion's  body 
embraced  an  outline  map  of  Belgium  and  the  con- 
temptuous tongue  of  the  lion  was  that  bit  of  Belgian 
territory  that  was  strongly  held  by  the  Belgian 
troops  throughout  the  war. 

In  addition  to  the  Belgian  notes  there  was  a  great 
flotation  of  German  marks.  When  the  German 
troops  evacuated  Belgium  the  Government  faced  the 
problem  of  withdrawing  from  circulation  both  Ger- 
man marks  and  the  forced  issue  of  the  Societe 
Generale.  It  accomplished  this  by  giving  in  ex- 
change a  certain  amount  of  the  notes  of  the  National 
Bank  of  Belgium  and  the  remainder  in  bonds  of  the 
national  government.  As  a  result  of  this  exchange 
it  holds  now  more  than  six  billion  marks  of  German 
currency,  an  amount  normally  equal  to  one  billion 
two  hundred  million  dollars. 

France   had    a    similar    problem    in    Alsace    and 


A  CHAOS  OF  CURRENCIES  27 

Lorraine.  With  more  patriotism  than  financial 
judgment  France  exchanged  French  bank  notes  for 
the  marks  at  the  rate  of  l1^  francs  for  each  mark. 
This  cost  France  half  a  billion  dollars,  and  she  now 
holds  a  corresponding  amount  of  marks. 

The  currency  situation  in  Great  Britain,  France 
and  Belgium  was  simplicity  itself,  however,  compared 
with  that  in  some  of  the  nations  on  the  Eastern 
Front.  After  the  armistice  Poland  found  itself  poor 
in  everything  but  currency.  There  were  in  circula- 
tion there  huge  amounts  of  Russian  roubles  issued 
under  the  old  imperial  regime,  counterfeits  issued  by 
Germany,  counterfeits  issued  by  the  Bolshevists, 
Kerensky  roubles,  Bolshevist  roubles,  German  marks, 
Polish  marks,  representing  a  forced  issue  which  Ger- 
many had  compelled  during  her  occupation,  and  per- 
haps of  the  least  value  of  all,  Austrian  crowns.  Here 
was  a  conglomeration  of  notes  more  intricate  than 
anything  Mr.  Paderewski  had  ever  tried  to  play. 
But  he  has  made  an  attempt  to  straighten  out  the 
complication  by  issuing  a  new  Polish  currency  and  by 
taking  in  the  forced  Polish  issue,  returning  half  the 
notes  stamped  and  retaining  the  other  half  against 
an  issue  of  bonds,  while  the  other  currency  issues  are 
being  exchanged  on  various  terms  for  Polish  obliga- 
tions. 

Serbia,  Rumania,  Czecho-Slovakia  had  almost  as 


28   WHAT  HAPPENED  TO  EUROPE 

complicated  a  currency  situation  and  have  made 
heroic  attempts  to  reduce  the  circulation  by  calling 
in  all  existing  issues,  returning  part  of  them  stamped 
and  issuing  funded  obligations  of  the  state  to  repre- 
sent the  notes  retired  or  carried  in  the  state's 
treasury. 

The  Austrian  note  issue  has  become  so  compli- 
cated and  the  gold  reserve  so  slight  that  the  gold 
reserve  represents  three-eighths  of  one  per  cent,  of 
the  circulation. 

Another  currency  complication  that  has  added 
to  the  untold  difficulties  is  found  in  the  Bolshevik 
attempt  to  counterfeit  successfully  sterling,  francs, 
pesetas,  lire  and  marks.  How  far  this  has  gone  no 
one  knows.  Counterfeits  of  the  circulating  notes  of 
the  Bradford  Bank,  one  of  the  few  banks  in  England 
that  has  powers  of  issue  left,  aside  from  the  Bank 
of  England,  have  reached  England.  The  Governor 
of  the  Bank  of  England  has  seen  no  counterfeits  of 
the  Bank  of  England  note,  but  there  is  said  to  be  a 
plentiful  supply  of  them  in  Constantinople  and 
throughout  the  Near  East,  where  a  greater  con- 
fidence was  shown  in  Bank  of  England  notes  than  in 
any  other  form  of  paper  currency ;  and  the  Bolshe- 
vists were  ready  to  meet  the  demand. 

This  program  of  wholesale  counterfeiting  by  the 
Bolshevists  is  a  part  of  their  political  program.  In 


A  CHAOS  OF  CURRENCIES  29 

Bolshevist  political  economy  there  is  no  place  for 
money.  They  found  it  was  impossible  to  withdraw 
money  from  circulation  in  Russia  and  so  they  con- 
sciously set  to  work  to  make  Russian  money  of  no 
value  by  printing  unlimited  amounts  not  only  of  their 
own  rouble  issue,  but  of  the  Czar  notes  and  the 
Kerensky  roubles.  The  finest  money  printing  estab- 
lishment in  the  world,  next  to  the  Bureau  of  Engrav- 
ing and  Printing  in  Washington,  was  located  at 
Petrograd.  The  Bolshevist  propaganda  in  other 
nations  required  money,  and  so  they  set  to  work 
counterfeiting  the  notes  of  other  nations  with  the 
double  object  in  view  of  furnishing  funds  for  the 
immediate  use  of  Bolshevist  propagandists  in  other 
countries,  and  for  the  deeper  purpose  of  destroying 
confidence  of  other  peoples  in  their  own  circulation 
by  injecting  perfectly  executed  counterfeits  into  the 
circulation  of  other  countries.  No  one  professes 
accurately  to  know  how  far  this  diabolical  scheme 
has  been  successful.  It  is  regrettable  that  in  this 
connection  the  Bolshevists  had  the  example  of  one 
of  the  Allies,  who  counterfeited  the  mark  while  the 
war  was  on  and  gave  the  counterfeit  paper  to  Ger- 
man socialists  to  help  their  propaganda  in  Germany. 
In  normal  times  of  peace  the  great  varieties  of 
currency  circulating  in  Europe  always  tended  to 
hamper  the  freedom  of  commercial  operations.  The 


30        WHAT  HAPPENED  TO  EUROPE 

difficulties  which  flow  in  the  train  of  the  numerous  and 
extremely  complicated  issues  now  in  circulation 
make  the  currency  situation  on  the  continent  a 
serious  obstacle  in  the  way  of  returning  to  a  normal 
economic  life. 


CHAPTER  IV 

ENGLAND 

ENGLAND'S  industrial  situation  and  outlook  are 
enormously  interesting  to  Americans.  Since  the 
birth  of  modern  industrialism  England  has  been  pre- 
dominant in  the  international  industrial  field.  At 
no  time  prior  to  the  war  did  she  cease  to  make 
progress,  although  Germany,  and  the  United  States 
in  later  years,  progressed  on  so  much  more  rapid  a 
scale  that  England's  premier  position  was  being 
endangered. 

England's  great  industrial  advantage  lay  in  her 
coal  and  her  workmen.  Most  of  her  raw  material 
had  to  be  imported.  She  could  not  feed  herself,  but 
with  the  genius  of  the  English  for  industrial  organi- 
zation, the  island  was  turned  into  one  huge  industrial 
settlement,  and  a  national  life  has  been  built  up 
which  is  as  dependent  upon  a  continuation  of  outside 
demand  for  products  of  English  workshops,  as  would 
be  the  case  with  a  New  England  mill  town.  There 
is  a  population  too  large  to  be  fed  by  home  supplies, 
that  gains  its  living  by  passing  raw  materials  through 
the  workshops,  and  selling  the  product  to  foreign 

31 


32        WHAT  HAPPENED  TO  EUROPE 

countries  for  the  means  with  which  to  buy  food  and 
more  raw  materials. 

I  think  the  picture  of  England  that  is  in  the  mind 
of  the  average  American  manufacturer  who  is  look- 
ing forward  to  international  competition  is  that  her 
industries  have  greatly  benefited  by  the  war.  He  has 
known  English  industry  before  the  war  as  hampered 
in  the  introduction  of  the  latest  types  of  labor-saving 
machinery  through  a  certain  conservatism  on  the 
part  of  both  employers  and  men,  while  the  restric- 
tive rules  and  agreements  of  union  labor  limited  the 
output  below  the  output  per  man  in  our  own  shops 
under  similar  circumstances.  Our  American  manu- 
facturers believe  that  the  war  has  greatly  improved 
the  position  of  English  industry  through  a  forced 
awakening  to  the  possibilities  of  labor-saving  machin- 
ery, and  through  the  relaxation  of  restrictive  regula- 
tions imposed  by  unions.  The  general  belief  in 
America  is,  or  at  least  was  three  months  ago,  that 
America  will  encounter  more  intelligent  and  more  ef- 
fective competition  from  British  industry  than  has 
ever  been  the  case  before,  and  that  while  Great  Britain 
faces  some  desperate  needs,  the  very  pressure  of  her 
difficulties  would  inspire  her  industry  with  a  keener 
intelligence  in  its  production,  and  more  insistent 
pressure  for  output.  On  the  whole,  it  was  believed 
that  the  war  would  result  in  a  great  revival  in  British 
industry. 


ENGLAND  33 

Now  let  us  examine  the  facts  in  the  light  of  events 
of  the  first  six  months  following  the  armistice. 
Indeed,  it  is  rather  necessary  to  go  back  of  that  and 
look  a  little  more  deeply  into  the  reason  why  England 
kept  her  industrial  supremacy  as  well  as  she  did. 
Compared  with  the  United  States  she  was  handi- 
capped by  lack  of  raw  material.  That  disadvantage 
was  in  a  way  compensated  for  by  her  ability  to  load 
steamers  for  both  the  incoming  and  the  outgoing 
trip.  Foodstuffs  and  raw  material  came  in,  more 
bulky  it  is  true,  than  the  manufactured  goods  that 
went  out,  but  there  was  never  a  line  of  steamers,  no 
matter  whence  they  might  come,  to  which  England 
could  not  furnish  something  of  a  cargo  outbound. 
Her  outgoing  bulk  was  increased  by  her  great  coal 
shipments,  and  so,  on  the  whole,  there  was  a  fair 
balance  in  cargoes  and  much  of  her  disadvantage  in 
respect  to  domestic  raw  material  was  overcome. 
Still  Germany  was  better  placed  as  to  raw  material 
and  had  a  greater  genius  for  factory  organization, 
and  rapidly  advanced  in  her  relative  position. 
America,  rolling  in  a  wealth  of  raw  material,  but 
with  a  wage  scale  two  to  three  times  as  great  as  her 
European  competitors,  made  her  best  progress  in 
those  types  of  production  where  labor  cost  was  a 
comparatively  small  part  of  the  completed  value. 

The  struggle  in  the  neutral  markets,  however,  was 


34        WHAT  HAPPENED  TO  EUROPE 

so  keen  that  it  bore  on  England  with  increasing 
severity.  The  obvious  way  to  hold  down  cost,  in 
the  minds  of  most  manufacturers,  was  to  hold  down 
wages.  That  was  resisted  by  the  most  complete 
union  labor  organization  in  the  world.  Eighty-five 
per  cent,  of  the  industrial  workers  of  Great  Britain 
are  said  to  be  organized  in  unions,  and  the  leadership 
has  on  the  whole  been  of  an  extremely  high  order. 
It  has  in  the  main  been  studious  leadership,  in  which 
men  have  recognized  that  there  are  immutable  eco- 
nomic laws  and  have  striven  to  understand  them  and 
conform  to  them.  This  was  met  by  a  good  deal  of 
blind  toryism  among  the  employers,  although  on  that 
side  there  are  examples  of  liberalism  of  thought  and 
a  depth  of  intelligence  that  I  do  not  think  can  be 
matched  in  America. 

On  the  whole  the  forces  tending  to  keep  down 
wages  proved,  for  twenty  years  prior  to  the  war, 
almost  as  strong  as  the  forces  tending  to  raise  them, 
and  the  result  has  been  during  that  period  that  with 
a  somewhat  increasing  cost  of  living,  the  standard  of 
living  of  the  laborer  has  certainly  not  much  advanced 
and  I  believe  on  the  whole  has  retrograded.  What- 
ever the  statistics  of  index  numbers  may  show,  at 
least  two  great  broad  facts  are  evident.  One  of 
these  is  the  deterioration  in  physique.  It  may  seem 
strange  to  suggest  a  deterioration  in  English 


ENGLAND  35 

manhood  in  the  light  of  England's  accomplishment 
during  four  and  one-half  years  in  battle.  Certainly 
she  is  not  a  nation  in  physical  decadence,  for  never 
has  there  been  shown  such  bull-dog  tenacity  or 
greater  physical  courage.  Nevertheless,  a  visit  to 
the  mill  towns  of  the  cotton  spinning  districts,  for 
example,  shows  almost  another  race  of  people  com- 
pared to  the  well-fed  Englishmen  we  know  in  London, 
a  race  undersized,  underfed,  underdeveloped  and  un- 
dereducated.  Lloyd  George's  famous  utterance  that 
you  could  not  build  an  A-l  nation  out  of  a  C-3 
population  has  sunk  deep  into  the  English  mind. 
The  statistics  of  physique  which  the  military  annals 
produce  show  that  one-third  of  the  male  population 
of  fighting  age  was  unfit  for  military  effort. 

The  other  great  outstanding  fact  indicating  in 
British  industry  a  wage  scale  insufficient  for  what  is 
regarded  as  a  minimum  standard  of  living,  is  found 
in  the  great  national  housing  problem.  The  brutal 
truth  is  that  England's  labor  has  been  so  underpaid 
during  the  last  generation  that  it  has  been  unable 
to  keep  a  roof  over  its  head,  and  to-day  there  is 
urgent  need  for  homes  for  a  million  working  men's 
families.  This  need  is  so  great  that  the  domestic 
situation  of  labor  has  become  a  national  scandal, 
recognized  by  Parliament  and  employers,  and  one 
of  the  most  important  national  movements  in  Eng- 


36        WHAT  HAPPENED  TO  EUROPE 

land  to-day  is  connected  with  the  housing  problem. 
There  is  a  program  working  through  national  aid, 
toward  the  immediate  building  of  five  hundred  thou- 
sand houses.  It  is  admitted  on  every  hand  that  the 
deterioration  and  crowding  in  houses  has  gone  to  a 
shocking  point  —  has  gone  so  far  that  nothing  short 
of  national  aid  can  rescue  English  labor  from  an 
intolerable  position. 

I  have  gone  into  this  situation  rather  fully  because 
I  believe  it  leads  to  a  conclusion  of  enormous  impor- 
tance in  ascertaining  the  future  position  of  British 
industry  in  international  competition.  The  differen- 
tial that  England  has  had  in  the  last  generation, 
compared  with  America,  and  I  believe  hi  some  degree 
with  Germany,  has  been  the  differential  of  a  wage 
scale  that  averaged  lower  than  the  point  at  which 
the  physical  efficiency  of  labor  could  be  maintained. 
In  order  successfully  to  compete  in  neutral  markets 
British  industry  has  made  a  red  ink  overdraft  on  the 
future,  an  overdraft  on  the  physique  of  her  citizens, 
an  overdraft  that  has  consumed  her  house  facilities ; 
that  overdraft  must  now  be  made  good,  at  the  ex- 
pense of  the  nation.  At  the  direct  expense  of  indus- 
try, a  minimum  wage  must  be  paid,  either  voluntarily 
or  such  wage  will  be  fixed  by  law.  Pretty  much  all 
labor  opinion  is  on  the  side  of  a  legal  enactment  in 
regard  to  a  minimum  wage,  and  a  considerable  body 


ENGLAND  87 

of  employers  has  also  reached  the  same  conclusion. 

This  means  that  the  differential  which  British 
industry  has  had  is,  for  the  most  part,  gone.  There 
can  be  no  more  overdrafts  on  the  future  of  this  char- 
acter. If  there  were  not  hope  of  getting  increased 
efficiency  in  production,  the  outlook  for  British  in- 
dustry on  this  account  alone  would  be  dark,  for  with 
the  differential  of  low  wages  lost,  England's  ability 
to  compete,  particularly  with  America,  will  be  seri- 
ously handicapped. 

The  factors  which  I  have  been  discussing  have  their 
roots  in  conditions  which  existed  prior  to  the  war. 

There  now  comes  another  great  factor,  that  for 
a  time  at  least  will  be  of  tremendous  importance  to 
the  British  industrial  situation.  I  have  said  that  all 
England  was  a  great  workshop  dependent  upon  out- 
side markets  to  consume  the  products  of  her  indus- 
tries in  order  that  a  margin  might  be  earned  to  enable 
her  to  buy  food.  The  great  customer  of  England 
was  the  continent  of  Europe,  and  English  life  has 
been  organized  in  such  a  way  that  the  market  for 
her  industrial  products  in  Europe  is  essential,  if  she 
is  to  earn  the  margin  that  she  requires  to  pay  for  her 
food  imports  from  other  countries.  There  has  now 
come  an  almost  inconceivable  disorganization  of  her 
European  market.  In  another  chapter  I  have  said 
something  of  continental  industry,  of  the  break- 


88        WHAT  HAPPENED  TO  EUROPE 

down  of  the  continental  domestic  transportation  sys- 
tem, and  of  the  chaos  in  currencies  and  credit. 
These  disorganizing  factors  thrown  into  the  nicely 
balanced  commercial  and  industrial  mechanism  have 
made  a  wreck  which,  compared  with  any  material 
injury  directly  caused  by  the  war,  makes  the  after- 
war  hurt  more  serious  than  the  direct  harm  of  shell 
and  bomb. 

It  is  essential  to  the  continuation  of  British  in- 
dustrial life  that  she  regain  her  European  market. 
That  means  that  the  demand  in  these  markets  must 
be  made  effective  by  giving  buyers  the  credits  that 
they  must  have  to  restart  the  commercial  cycle. 
That  cannot  be  effectively  done  until  the  industries 
of  Europe  are  themselves  restarted  and  idle  hands 
put  to  work  so  that  Europe  may  help  itself  back  to  a 
normal  industrial  life.  There  can  be  no  permanent 
international  trade  unless  both  sides  to  the  bargain 
have  something  to  sell.  Europe  cannot  buy  from 
England  unless  Europe  can  produce  something  to  sell 
to  the  nations  outside  of  Europe.  England's  ability 
to  regain  European  markets,  therefore,  hinges  upon 
the  restarting  of  European  industry.  Unless  that 
can  be  speedily  done  and  a  Continental  demand  for 
English  goods  reestablished,  England's  industrial  con- 
dition becomes  critical.  Indeed,  one  of  her  responsi- 
ble ministers  told  me  that  unless  her  European  mar- 


ENGLAND  39 

ket  can  be  reestablished  the  problem  of  the  govern- 
ment will  be  to  export  five  or  six  million  English  cit- 
izens to  the  colonies  and  elsewhere  where  they  will  be 
close  to  the  food  supply,  because  the  English  indus- 
trial machine  is  set  up  now  on  a  basis  that  requires 
something  like  the  whole  demand  from  the  Continental 
markets  in  order  that  enough  may  be  earned  to  buy 
the  food  that  the  English  must  have  to  live. 

Our  own  position  in  international  industrial  mar- 
kets will  be  in  large  measure  influenced  by  England's 
ability  to  continue  successfully  to  compete  in  those 
markets. 

There  are  other  important  factors  affecting  the 
future  of  English  industry,  some  of  which  are  impon- 
derable, for  they  have  to  do  with  character  and 
with  the  way  men's  minds  operate.  The  time  that 
was  at  my  disposal  to  inquire  into  this  important 
question  of  the  attitude  of  mind  of  labor  leaders,  of 
employers  and  of  government  officials,  was  brief ;  but 
I  encountered  such  marked  courtesy  on  the  part  of 
the  Government,  which  went  to  great  trouble  to 
arrange  a  series  of  interviews  with  Government 
ministers,  union  labor  leaders,  employers  and  others, 
that  I  was  able  to  see  many  important  leaders  in  a 
few  days.  In  carrying  out  this  program  of  inter- 
views there  was  such  complete  cooperation,  such 


40        WHAT  HAPPENED  TO  EUROPE 

frank  expressions  of  views,  that  I  feel  extraordinarily 
indebted  to  the  officials  who  arranged  the  interviews 
and  to  the  men  who  gave  up  their  time  to  them. 
Some  of  these  men  traveled  long  distances  to  London 
at  the  request  of  the  government  to  keep  these  ap- 
pointments. It  made  me  wonder  if  we  at  home 
would  be  as  courteous  under  similar  circumstances  to 
an  unofficial  visitor  of  an  inquiring  turn  of  mind. 

Among  the  people  whom  I  met  and  who  gave  me 
ample  time  for  a  full  discussion,  were  the  Minister 
of  Labor,  Sir  Robert  Home ;  the  Minister  of  Recon- 
struction, Sir  Auckland  Geddes;  the  Minister  of 
Food,  the  Right  Honorable  George  H.  Roberts; 
Lord  Milner;  Lord  Leverhulme;  Mr.  Rowntree;  the 
Right  Honorable  Arthur  Henderson ;  Prof.  G.  D.  H. 
Cole,  representing  the  radical  wing  of  the  Labor 
Party;  the  Right  Honorable  J.  H.  Whitley,  author 
of  the  so-called  "  Whitley  System "  of  Industrial 
Councils;  Mr.  A.  Taylor,  of  the  Federated  Trades 
Unions;  Commander  J.  B.  Adams,  General  Manager 
of  the  Employment  Exchanges,  and  many  others. 

After  three  days  fully  given  up  to  conversations 
with  these  men,  I  feel  entitled  to  say  something  on  the 
subject  of  the  English  attitude  toward  labor  ques- 
tions, even  though  one  might  smile  at  the  assurance 
of  doing  that  after  so  brief  a  study,  were  not  the 
sources  of  information  so  distinguished. 


ENGLAND  41 

I  had  had  a  fortnight  of  observation  of  labor  con- 
ditions beginning  the  first  of  February.  At  that 
time  strikes  in  the  tube  and  on  the  district  railway 
had  paralyzed  the  transportation  system  of  London. 
The  streets  were  crowded  with  army  lorries  packed  to 
capacity  with  standing  passengers.  Coal  was  so 
scarce  that  no  fires  were  permitted  in  bedrooms  and 
we  suffered  through  a  fortnight  of  intolerable  fog 
and  chill.  The  electric  employees  were  threatening 
to  cut  off  the  current  from  London  and  it  was 
momentarily  expected  that  they  would  act,  so  every 
one  was  furnished  with  candles  to  be  ready  for 
the  emergency.  Strikes  had  become  so  turbulent 
in  character  that  military  tanks  had  been  ordered  to 
Glasgow  and  were  ponderously  patrolling  the  streets. 
Five  hundred  thousand  men,  represented  by  the  rail- 
way and  transportation  workers'  union>  were  threat- 
ening an  immediate  strike  unless  differences  concern- 
ing hours  were  adjusted.  The  union  that  embraced 
the  entire  labor  force  engaged  in  coal  mining  had 
grown  weary  of  waiting  for  an  answer  from  the 
government,  which  is  operating  the  mines,  to  its 
demand  for  a  six-hour  day  at  an  increased  daily 
wage.  The  temper  at  that  date  was  uncompromising 
and  hostile  in  the  extreme.  Among  business  and 
financial  men  I  encountered  but  one  opinion,  and  that 
Was  that  England  was  in  for  such  a  fight  with  labor 


42        WHAT  HAPPENED  TO  EUROPE 

as  she  had  never  known  and  the  outcome  was  anything 
but  clear  and  had  in  it  possibilities  of  revolutionary 
import. 

Returning  to  London  on  the  first  day  of  May  I 
found  the  situation  as  completely  changed  as  it  would 
be  possible  to  imagine.  The  great  fundamental  com- 
mon sense  of  the  English- people  had  asserted  itself. 
The  intelligence  of  the  working  classes  and  the  labor 
attitude  of  the  government,  the  public  and  the 
employers,  had  united  in  at  least  a  temporary  solu- 
tion, which  apparently  removes  any  immediate  danger 
of  a  violent  or  revolutionary  movement  developing. 
During  that  period  some  substantial  progress  was 
made  in  actual  adjustments  of  differences,  but  of 
much  wider  significance  was  the  general  atmosphere, 
not  so  much  of  mere  concession,  as  of  a  common 
recognition  on  all  sides  of  certain  fundamental  prin- 
ciples. This  was  accomplished  in  the  face  of,  or 
perhaps  because  of,  a  rapidly  growing  army  of  unem- 
ployed which  was  increasing  directly  as  the  demobili- 
zation of  the  army  proceeded.  That  army  reached 
by  May  1st  a  number  in  excess  of  a  million,  who  were 
receiving  weekly  grants  from  the  government  of  29s 
per  man,  with  additional  grants  for  dependent  chil- 
dren, and  costing  the  government  treasury  above  a 
million  and  a  quarter  pounds  a  week.  This  had 
already  brought  the  total  paid  in  unemployment  toll* 


ENGLAND  43 

since  the  armistice  to  above  fifteen  million  pounds. 
In  the  three  months  that  had  intervened  since  my 
earlier  observations  the  strike  on  the  tubes  and  the 
district  railway  had  been  settled  by  the  granting  of 
shorter  hours.  The  difference  with  railway  em- 
ployees had  been,  for  the  time  being,  composed. 
The  government  partially  meets  the  views  of  labor. 
A  hurried  inquiry  into  the  conditions  of  the  coal 
mining  industry  had  presented  an  unanswerable  case 
for  the  coal  miners,  and  their  hours  were  cut  to  seven, 
from  pitmouth  to  pitmouth,  with  a  promise  of  further 
reduction  to  six  if  that  seemed  feasible  after  some 
experience  with  the  first  reduction.  Sporadic  strikes 
in  the  engineering  trades  had  been  settled  and  an 
inquiry  of  the  deepest  significance  was  in  progress 
bearing  on  the  question  of  the  nationalization  of  the 
coal  mines.  The  inquiry,  conducted  on  behalf  of  the 
miners,  by  Mr.  Robert  Smilie,  the  head  of  the  miners' 
union,  had  partaken  somewhat  of  the  sporting  char- 
acter of  a  Pujo  or  Stanley  inquiry,  but  it  was  strik- 
ing at  the  very  roots  of  the  economic  theory  of  prop- 
erty rights.  Land  owners  whose  title  dated  back  to 
royal  grants  made  in  the  14th  century  were  being 
distressingly  grilled  in  public  as  to  why  a  royal  dis- 
pensation in  the  thirteen  hundreds  entitled  them  to 
levy  tribute  on  every  ton  of  coal  to-day,  when  human 
beings  who  happened  to  be  miners  were  left  with  a 


44        WHAT  HAPPENED  TO  EUROPE 

division  that  gave  them  a  share  in  the  profits  of  an 
extremely  profitable  business  which  would  not  main- 
tain a  standard  of  living  under  present  conditions. 

I  regretted  that  this  examination  did  not  bring  out 
as  it  might  the  true  reason  whj  land  titles  should  be 
protected.  The  reason  is  not  because  those  titles 
were  granted  some  centuries  ago.  It  is  because  in  the 
main  it  has  been  well  demonstrated  that  it  is  better 
for  society  that  land  titles  should  be  protected. 
Every  communistic  experiment  in  holding  land  has  in 
the  end  led  to  deterioration  of  the  .land  and  to  less 
efficient  cultivation.  It  is  not  for  the  benefit  of  the 
individual  land-holder  that  land  should  be  protected. 
It  is  because  the  weight  of  evidence  indicates  that  it 
is  better  for  society  itself.  It  must  be  admitted  in 
the  case  of  the  English  coal  lands,  however,  that  the 
action  of  the  owners  had  certainly  obscured  this 
point. 

The  labor  leaders  with  whom  I  talked  impressed 
me  profoundly.  They  were  men  who  had  come  up 
from  the  ranks,  but  they  were  not  agitators.  They 
were  patriotic  Englishmen  with  a  great  love  for  their 
country  and  with  hope  for  its  future.  Some  of  them 
were  men  with  no  great  amount  of  culture,  but  with 
wide  knowledge.  They  had  an  understanding  of 
economics  that  could  only  have  been  obtained  by 
men  who  recognized  that  these  laws  were  of  tran- 


ENGLAND  45 

scendent  importance  and  that  the  principles  of  action 
under  which  they  led  unions  embracing  half  a  million 
men  must  be  formulated  in  accordance  with  sound 
economic  principles  or  the  leadership  would  go 
astray.  In  the  main  these  leaders  wanted  no 
socialistic  state  and  believed  that  the  best  future  of 
English  labor  and  of  the  British  state  lay  in  a  main- 
tenance of  the  present  social  order.  Some  of  them, 
notably  Mr.  Arthur  Henderson  and  Professor  Cole, 
did  not  agree  with  this  view  and  looked  forward  to 
an  ultimate  socialized  state.  But  they  presented 
their  views  with  a  saneness  and  moderation  of  pro- 
gram, which,  to  say  the  least,  entitled  them  to  a  re- 
spectful hearing. 

All  agreed  that  the  wing  of  the  labor  party  which 
believed  that  it  was  desirable  ultimately  to  overthrow 
the  present  order  of  the  capitalistic  state  and  to 
substitute  for  it  a  communistic  society  did  not  repre- 
sent over  ten  to  fifteen  per  cent,  of  the  organized 
laborers,  but  it  was  agreed  that  this  minority  was 
led  with  great  skill ;  that  it  understood  the  power  of 
propaganda,  while  the  more  conservative  majority 
was  phlegmatic  and  lacked  assertion.  It  was  agreed, 
too,  that  while  the  radical  minority  was  at  present 
small,  its  ranks  would  be  potentially  increased  if  liv- 
ing conditions  became  more  seriously  difficult. 

The  great  employers  of  labor  whom  I  met  were 


46       WHAT  HAPPENED  TO  EUROPE 

probably  representative  of  the  most  advanced  and 
liberal  thinking  employers.  Lord  Leverhulme,  for 
example,  is  the  open  advocate  of  a  six-hour  day, 
having  reached  that  conclusion  not  because  he  believes 
labor  will  accomplish  as  much  in  six  hours  as  in  a 
longer  working  period,  but  lie  thinks  industry  must 
use  its  machinery  to  a  greater  advantage  than  keep- 
ing it  employed  for  one-third  of  the  twenty-four 
hours.  He  therefore  concludes  that  two  shifts  of 
six  hours  a  day  present  the  ultimate  solution. 

I  cannot  but  believe  that  there  is  still  a  great  mass 
of  Tory  thought  in  the  employing  classes.  It  is 
certain  that,  broadly  speaking,  employers  are 
thoroughly  awake  to  the  necessity  for  concessions 
to  labor.  There  is  an  awakened  consciousness 
of  responsibility  for  unemployment.  The  industrial 
theory  that  labor  is  a  commodity  to  be  bought  when 
wanted  on  the  best  terms  that  the  bargain  can  be 
made,  is  disappearing.  The  idea  that  there  should 
be  a  genuine  minimum  wage,  varying  with  different 
localities  and  conditions,  but  applicable  to  every  one, 
is  gaining  ground.  Employers'  minds  are  beginning 
to  wonder  if  industry  has  not  been  shortsighted  in 
leaving  labor  always  in  a  state  of  apprehension  in 
regard  to  the  stability  of  its  position  and  at  least  to 
question,  if  not  fully  to  admit,  that  industry  would 
gain  in  efficiency  under  a  system  of  unemployment 


ENGLAND  47 

insurance.  The  aspirations  of  labor  for  a  larger 
voice  in  the  management  of  industry  is  being  listened 
to  with  attention,  and  on  every  hand  there  is  recogni- 
tion that  in  the  future  labor  will  have,  and  in  justice 
should  have,  a  larger  division  of  profits  of  industry 
either  in  the  form  of  profit  sharing  or,  what  seems 
more  practical  for  the  present  at  least,  maximum 
wages  above  minimum  standards.  So  far  as  the  gov- 
ernment officials  are  concerned,  they  seemed  intelli- 
gently 'and  keenly  awake  to  the  various  questions 
involved  in  the  labor  problem,  but  like  all  govern- 
ments, move  slowly  in  positive  action. 

Perhaps  the  most  significant  thing  that  I  got  out 
of  these  interviews  was  the  sense  of  a  sort  of  dogged 
optimism  in  the  minds  of  all  classes  and  a  belief  in 
the  power  and  intelligence  of  England  and  English- 
men, a  more  or  less  conscious  impression,  that  they 
would  work  out  eventually  a  relationship  between 
labor  and  capital  in  which  all  apparent  sacrifices  that 
capital  might  have  to  make  would  be  more  than  com- 
pensated for  by  the  increased  efficiency  which  would 
come  from  a  body  of  satisfied  workmen.  Every  one 
admits  that  the  days  prior  to  the  war  when  industry 
was  hampered  by  a  chaotic  network  of  union  and 
labor  restrictions  on  output  have  passed  and  will 
never  return.  There  are  instances  current  at  the 
moment  of  blind  restrictive  rules  being  again  imposed 


48        WHAT  HAPPENED  TO  EUROPE 

by  union  labor,  but  I  think  those  instances  are 
sporadic  and  not  indicative  of  labor's  mind.  If  the 
hope  which  was  clearly  expressed  by  some  employers 
that  a  satisfied  body  of  workmen  putting  their  brains 
into  the  job,  will  in  the  end  produce  on  a  scale  which 
will  make  the  present  scale  of  production  seem  indica- 
tive of  a  period  of  the  dark  ages  in  industrialism  — 
I  say,  if  that  hope  is  realized,  the  future  of  England's 
industry  is  brought  beyond  anything  ever  dreamed  of. 


CHAPTER  V 

FRANCE 

FRANCE  thrills  one  with  admiration  that  there  was 
in  the  world  a  nation  of  such  superb  valor,  but  one 
sighs  if  he  studies  the  present  position  of  that  gal- 
lant nation.  France  never  stopped  to  count  the 
price  in  courage  and  manhood  that  she  must  pay,  to 
defend  herself  from  the  Hun.  There  was  never  any 
reckoning  as  to  what  the  future  had  in  store.  All 
things  were  possible  to  that  patriotism  which  is  un- 
surpassed. And  no  more  did  France  count  the  finan- 
cial cost.  Indeed  I  think  the  French  mind  grows 
bewildered  when  the  unit  of  a  billion  is  reached. 
They  call  it  a  milliard  and  after  you  have  annexed 
nine  ciphers  to  a  figure,  the  French  mind  no  longer 
follows.  It  got  to  be  all  the  same  when  the  debt  of 
France  piled  up  to  a  hundred  milliards  and  then  two 
hundred,  and  when  engagements  were  made  that  will 
take  it  far  beyond  that  figure.  It  got  to  be  like 
figures  in  astronomy  that  are  so  great  that  they  are 
represented  by  conventional  symbols. 

With  some  capacity  for  adding  two  and  two,  the 
first  thing  that  struck  me  in  France  was  the  disparity 

49 


50        WHAT  HAPPENED  TO  EUROPE 

between  budget  requirements  and  anything  that  taxa- 
tion ha's  yet  yielded.  I  talked  with  ministers,  legis- 
lators and  bankers^  but  none  of  them  shared  my 
anxiety.  All  of  them,  in  the  month  of  February, 
still  felt  confident  that  the  national  financial  position 
was  to  be  made  right  by  the  payment  of  indemnity. 
They  were  hazy  on  how  that  indemnity  was  to  be 
paid,  in  just  what  form  the  payments  were  to  be 
made.  But  of  one  thing  they  were  very  certain;  it 
would  be  a  deadly  danger  to  France  if  German 
industry  were  allowed  to  recover  before  French 
indus-try  was  on  its  feet,  and  France  in  the  future 
be  flooded  with  German  goods. 

A  Dutch  banker  in  talking  with  me  one  day  threw 
up  his  hands  in  despair  over  the  French  mind. 
"  They  want  to  milk  the  cow  and  cut  its  throat  at 
the  same  time,"  he  said. 

Cutting  a  cow's  throat  while  you  milk  her  interferes 
with  that  maternal  quietude  of  mind  which  is  con- 
ducive to  a  generous  down-giving  of  milk.  Whatever 
the  French  mind  is,  it  is  usually  logical.  It  can  be 
forgiven  in  this  case,  however,  for  utterly  neglecting 
logic,  for  it  must  be  remembered  that  triumphant  as 
France  stands,  she  is  still  in  abject  terror  of  the 
future,  if  that  future  holds  a  military  Germany. 

France's  loss  of  man  power  is  one  of  the  obvious 
things.  Six  months  after  the  armistice  there  were 


FRANCE  51 

women  conductors  upon  the  street  cars ;  women  work- 
ing about  the  railroad  yards ;  women  everywhere  in 
the  fields. 

France  had  a  visible  aspect  of  having  been  bled 
white.  Men  far  along  in  the  forties  could  be  seen  in 
soldier  uniform  and  everywhere  there  seemed  an 
actual  shortage  of  human  power.  It  is  sad  to  remem- 
ber that  during  the  war  the  population  of  France, 
quite  aside  from  all  military  losses,  showed  a  decrease 
of  eight  hundred  thousand, —  eight  hundred  thousand 
more  deaths  than  births. 

I  traversed  the  whole  distance  of  the  French  front. 
The  pathos  of  that  devastated  territory  is  beyond 
words  —  the  all  but  homeless  people  camping  in 
wrecked  buildings  with  windows  screened  with  paper. 
Patient  peasants  toiling  northward  with  scanty 
furnishings  for  the  home  they  hoped  to  return  to, 
were  poignant  sights,  when  one  had  come  fresh  from 
the  regions  toward  which  they  were  going  and  knew 
that  no  roof  stood  in  all  the  land. 

But  in  trying  to  get  some  estimate  of  the  future  of 
France  I  wanted,  so  far  as  possible,  to  get  the  awful 
picture  of  the  battle  front  out  of  my  mind,  and 
remember  that  south  of  that  terrible  scar  still  lies 
unharmed  one  of  the  most  beautiful  countries  in  all 
the  world.  The  devastating  hand  of  war  has  only 
blighted,  after  all,  a  comparatively  small  area,  even 


52        WHAT  HAPPENED  TO  EUROPE 

though  that  area  held  an  important  proportion  of 
the  total  of  all  French  industry.  Still,  facts  must 
be  looked  in  the  face,  although  perhaps  less  than 
any  other  nation  involved  in  the  war  has  France  been 
disposed  so  to  look  facts  in  the  face.  It  must  be  re- 
membered that  her  pre-war  debt  was  about  one  hun- 
dred and  sixty  dollars  per  capita ;  that  the  balancing 
of  her  pre-war  budget  was  difficult,  and  that  no  recent 
government  had  felt  strong  enough  to  carry  out  the 
pressing  and  necessary  funding  of  her  floating  debt. 
To-day  her  bonded  debt  is  about  twenty-six  billion 
dollars,  or  about  six  hundred  and  fifty  dollars  per 
capita;  there  are  thirty-three  billion  francs  of  short 
term  unfounded  obligations.  The  Government  owes 
the  Bank  of  France  twenty  billions.  If  she  makes  the 
payments  that  she  expects  to  make  immediately  in 
grants  to  families  of  her  dead,  to  her  wounded,  and  to 
aid  in  the  rehabilitation  of  the  devastated  area,  her 
total  obligations  will  be  about  two  hundred  billion 
francs. 

Her  immediate  necessity  is  to  provide  income  for  a 
budget  that  foots  over  twenty-three  billions.  Her 
income  from  taxation  before  the  war  was  over  three 
and  one-half  billions  (1913)  and,  of  course,  a  large 
area  in  which  taxes  were  gathered  then  can  contribute 
nothing  to  the  national  treasury  for  several  years. 
Her  new  territory  will,  perhaps,  compensate  this  loss. 


FRANCE  53 

The  estimated  national  wealth  of  France  before  the 
war  was  four  hundred  billion  francs.  If  the  present 
wealth  of  France  were  to  be  calculated  in  a  depreci- 
ated currency  it  might,  without  any  increase  over  the 
true  value  before  the  war,  reach  a  figure  very  much 
higher  than  four  hundred  billion.  Conceivably  the 
currency  might  depreciate  so  that  the  measure  of  the 
wealth  would  be  so  great  in  francs,  that  with  a  debt 
of,  say  two  hundred  fifty  billion  francs,  it  would  be 
only  one-third  or  one-fourth  of  the  total  national 
wealth  instead  of,  as  it  now  appears  to  be,  five-eighths 
or  three-fourths  of  the  total  national  wealth.  How- 
ever, it  must  be  remembered  that  inability  to  collect 
taxes  from  certain  districts  is  equivalent  to  an 
increase  in  the  total  debt.  To  comment  on  what 
these  figures  mean  would  be  brutal. 

Let  us  pass  by  in  silence  the  engagements  of  France 
to  her  own  people.  That  is  her  affair.  We  may  be 
sympathetic  but  we  need  not  be  critical.  There  is  a 
phase,  however,  in  which  the  outside  world  cannot  but 
be  deeply  interested  and,  unpleasant  as  it  is,  one 
must  refer  to  some  of  the  salient  facts  of  international 
balances.  Before  the  war  France  was  helped  to  meet 
that  trade  balance  by  a  huge  income  from  foreign 
securities  owned  by  her  people.  These  foreign 
securities  included  an  investment  of  twenty  billion 
francs  in  Russian  government  bonds;  five  billion 


54        WHAT  HAPPENED  TO  EUROPE 

francs  in  Russian  industries ;  five  billion  francs 
in  Turkish  obligations  and  a  substantial  amount  in 
Greek  and  Balkan  securities.  Here  was  at  least  a 
billion  and  a  half  francs  coming  in  annually  in  the 
form  of  interest  payments  and  it  was  this  income 
that  balanced  her  international  account.  For  a  time 
the  government  took  up  from  French  investors  the 
dishonored  Russian  coupons,  but  it  has  announced 
that  it  can  do  that  no  longer. 

The  depletion  of  her  income  from  outside  the 
nation  is  only  half  the  story,  however.  Before  the 
war  French  investors  held  all  the  obligations  of  their 
own  government.  To-day  France  owes  England 
£434,490,000  and  America  $2,802,477,000.  At  the 
moderate  rate  of  five  per  cent,  she  needs  new  exports 
amounting  to  $245,000,000  in  value  to  meet  that  in- 
terest engagement  alone.  With  her  outside  income 
decreased  by  a  billion  and  a  half  francs,  with  a  new 
obligation  of  $240,000,000  to  meet  the  interest  on 
her  foreign  indebtedness,  and  with  her  capacity  for 
merchandise  export  cruelly  depleted,  the  problem  of 
balancing  her  international  account  is  one  that  calls 
for  the  wisest  financial  minds  that  ever  engaged  them- 
selves with  a  desperate  cause. 

By  the  time  I  returned  to  Paris  after  visiting 
Switzerland,  Italy  and  Spain  I  found  considerable 
change  in  the  atmosphere.  Men  in  authority  were 


FRANCE  55 

beginning  to  realize  something  of  the  inexorable  logic 
of  the  figures  and  to  wonder  what  was  to  be  done. 
With  pathetic  unanimity  their  mind  turned  toward 
America's  assuming  part  of  France's  debt.  It  was 
not  usually  put  so  directly  as  that,  but  one  could 
not  talk  to  an  important  Frenchman  for  five  minutes 
that  he  did  not  bring  forward  a  plan,  logical  in  con- 
struction, plausible  in  appearance,  but  always  leading 
up  to  America's  dividing  with  the  Allies  the  war 
burden. 

The  government  has  borrowed  over  twenty-three 
billions  of  francs  from  the  Bank  of  France.  I  was 
told  that  the  great  Paris  banks  had  eighty  per  cent, 
of  their  fortfolios  in  government  obligations. 

France  has  not  raised  taxes  as  England  and 
America  have.  The  politicians  fear  the  antipathy  of 
the  French  towards  increased  taxes.  Probably  any 
government  that  attempts  seriously  to  raise  taxes  will 
fall.  The  gap  is  so  great  between  present  income 
and  the  budget  demands  that  it  would  need  a  truly 
(heroic  Finance  Minister  who  will  propose  a  tax 
scheme  that  will  close  that  gap. 

The  great  anchor  of  France,  so  far  as  its  internal 
political  safety  is  concerned,  lies  in  the  fact  that 
there  are  six  million  landowners,  and  that  the  whole 
nation  is  made  up  of  small  investors.  In  some  of 
the  industrial  centers,  such  as  Lyons  and  St.  Etienne 


56        WHAT  HAPPENED  TO  EUROPE 

there  is  plenty  of  latent  Bolshevism.  There  is,  of 
course,  an  active  socialist  party,  but  France  would 
not  seem  good  soil  in  which  to  propagate  the  ideals 
of  Bolshevik  Communism. 


CHAPTER  VI 

ITALY 

WHEN  one  comes  to  see  the  importance  of  looking 
at  a  nation  in  the  light  of  its  power  of  self-sustenance, 
he  will  distinguish  sharply  between  domestic  wealth 
and  a  national  ability  to  command  and  pay  for 
necessities  of  foreign  origin.  No  matter  how  rich  a 
nation  may  be  within  itself,  if  it  is  deficient  in  some 
essential  that  must  be  imported,  it  must  also  have 
some  commodity  of  equal  value  that  the  world  out- 
side wants  and  will  pay  for.  In  attempting  to 
gauge  the  future  of  the  different  European  nations 
one  must  at  the  very  beginning  include  an  examina- 
tion of  the  international  commodity  balances  neces- 
sary to  the  life  of  each  nation. 

Take  Italy,  for  example.  She  is  wonderfully  rich 
in  man  power,  moderately  well-to-do  in  agricultural 
resources.  She  has  partly  developed  her  great 
potential  resources  of  water  power,  but  she  has  not  a 
pound  of  good  native  coal,  little  mineral  of  any  kind, 
and  none  of  the  great  staple  raw  materials.  She 
raises  silk  which  she  unwinds  from  the  cocoons  onto 
the  bobbins  and  spins  into  skeins,  and  then,  in  the 

67 


58        WHAT  HAPPENED  TO  EUROPE 

main,  exports  it  to  the  looms  of  France  and  Switzer- 
land, and  formerly  to  Austria,  to  be  woven. 

It  is  absolutely  essential  to  her  life  to  import  about 
a  million  tons  of  coal  a  month,  all  of  her  cotton,  much 
of  her  wool  and  some  of  her  food.  She  exports  the 
lovely  skeins  of  yellow  silk;  her  looms  convert 
American  cotton  with  a  great  deal  of  skill  into  cheap 
fabrics  for  the  Near  East.  She  exports  olive  oil 
and  a  few  special  food  products  of  small  value  in  the 
aggregate,  such  as  macaroni,  cheese  and  a  certain 
amount  of  wine.  In  the  present  stage  of  her  indus- 
trial development  she  has,  comparatively  speaking, 
little  to  export  and  an  absolutely  insistent  need  for 
very  considerable  imports. 

For  many  years,  therefore,  Italy's  foreign  trade 
has  been  out  of  balance.  She  could  not  sell  the  world 
goods  equal  in  value  to  the  amount  of  goods  she  must 
have  from  the  world.  She  did  have,  however,  two 
special  and  unusual  sources  of  annual  income.  To 
tourists  Italy  has  for  centuries  been  "  the  garden 
spot  of  all  the  world."  The  loveliness  of  nature,  the 
deep  historical  interest  of  the  cities  and  the  monu- 
mental remains  of  her  wonderful  history,  the 
unequaled  collection  of  the  art  treasures  of  all  time, 
have  for  centuries  made  Italy  the  spending  ground 
for  the  savings  of  tourists.  The  aggregate  from 
that  source  reached  very  large  figures  in  recent  years, 


ITALY  59 

figures  so  important  that  thrown  into  the  scale  pans 
along  with  her  deficient  exports  they  did  much  to  cor- 
rect the  balance. 

She  had  another  important  source  of  annual 
income,  reaching  indeed  in  recent  years  to  upwards 
of  a  hundred  million  dollars,  and  that  was  the  savings 
her  emigrant  sons  sent  home.  This  has  been  a  con- 
stant and  a  growing  fund  which  yearly  contributed 
in  an  important  degree  toward  equalizing  the  inter- 
national balance.  For  several  years  prior  to  the 
war,  and  in  spite  of  a  deficient  volume  of  exports, 
Italy  was  able  fully  to  balance  her  international 
account  without  making  foreign  loans,  through  the 
aid  of  these  two  great  sources  of  annual  income  — 
the  expenditure  by  tourists  and  the  remittance  from 
her  emigrants. 

The  war  has  wholly  changed  this  satisfactory  posi- 
tion. During  the  war  Italy  incurred  foreign  obliga- 
tions amounting  to  $3,100,000,000,  the  annual 
interest  charge  on  which  is  say,  $155,000,000.  This 
alone  would  have  thrown  her  international  account  se- 
verely out  of  balance  and  would  have  been  extremely 
serious  because  she  has  no  way  by  which  it  is  feasible 
promptly  to  increase  her  exports.  But  the  incurring 
of  the  foreign  obligation  with  its  annual  interest 
requirements  is  only  a  part  of  her  present  difficulties. 
The  embargo  on  travel  all  through  the  war  and  a 


60        WHAT  HAPPENED  TO  EUROPE 

certain  continuance  of  that  embargo  for  a  further 
year  or  two  costs  Italy  in  her  international  account 
not  less  than  $200,000,000  a  year,  while  her  other 
source  of  annual  income,  the  remittance  from  emi- 
grants, has  necessarily  been  greatly  curtailed  because 
of  the  return  to  the  colors  of  a  great  number  of  her 
industrious  sons.  These  emigrant  remittances  have 
continued  in  remarkable  volume,  but  still  there  is  a 
deficiency  there  from  pre-war  figures  that  is  impor- 
tant in  view  of  the  extreme  need  for  something  to 
counter-balance  the  absolutely  necessary  payments 
that  Italy  must  make  abroad. 

Two  of  her  important  exports,  raw  silk  and  cheap 
manufactured  cotton  goods,  have  had  their  market 
seriously  interfered  with.  The  markets  for  the  raw 
silk  were  France,  Austria,  Germany  and  Switzerland. 
The  market  in  the  Central  Powers  was  wholly  cut  off 
and  in  France  badly  disorganized. 

The  raising  of  the  cocoon  is  an  essential  part  of 
the  agricultural  industry  of  Italy.  The  cocoons  are 
sold  to  the  silk  mills  in  June  and  throughout  the  rest 
of  the  year  the  mills  are  busy  winding  the  half  mile 
or  more  of  fiber  that  each  cocoon  is  said  to  contain 
into  yellow  skeins  of  raw  silk  that  in  the  main  go  to 
foreign  looms  to  be  dyed  and  woven.  The  cocoons 
are  paid  for  by  the  silk  mills  in  June.  The  mills  in 
turn  receive  their  payment  for  the  raw  silk  month  by 


ITALY  61 

month  throughout  the  year.  Here  was  where  the 
fluctuation  in  exchange  made  a  serious  difficulty. 
The  silk  mills  having  paid  for  the  cocoons  a  definite 
amount  of  lire  found  when  they  came  to  dispose  of 
the  raw  silk  some  months  later  that  the  currencies 
were  so  depreciated  that  the  raw  silk  could  not  be 
sold  for  enough  to  reimburse  them  for  what  they 
had  paid  for  their  cocoons. 

In  this  trying  situation  the  Government  came  to 
the  rescue  and  made  a  fixed  price  at  which  it  would 
buy  raw  silk.  It  was  forced  to  do  this ;  otherwise 
the  silk  mills,  in  the  face  of  a  wildly  fluctuating  ex- 
change market,  would  have  had  no  secure  ground  to 
stand  upon  in  buying  the  next  crop  of  cocoons  and 
the  whole  silk-raising  industry  would  have  become 
disorganized  in  the  very  seat  of  production,  the  peas- 
ant homestead.  Under  the  working  of  this  arrange- 
ment the  Italian  Government  has  accumulated  $75,- 
000,000  worth  of  raw  silk  and  has  created  a  situa- 
tion in  the  silk  market  which  is  perhaps  economically 
unsound  but  humanly  necessary.  At  least  it  was 
necessary  in  some  way  to  keep  the  industry  of  silk 
production  alive.  The  difficulties  of  the  situation 
were  so  great  that  without  government  intervention 
the  silk  mills  would  not  have  taken  the  risk  of  pur- 
chasing a  year's  crop  of  cocoons  with  the  hazards  of 
a  disorganized  market  and  wildly-fluctuating  ex- 


62   WHAT  HAPPENED  TO  EUROPE 

change  rate  throughout  the  year  during  which  they 
must  dispose  of  the  spun  silk. 

The  production  of  cheap  cotton  fabrics  for  the 
Near  East  has  also  been  disorganized.  During  the 
war  it  was  not  possible  to  produce  them,  nor  would  it 
have  been  possible  to  export  them  if  the  production 
could  have  been  kept  up.  Now,  there  is  an  unlimited 
demand  in  the  Near  East,  but  it  is  not  an  effective  de- 
mand because  there  is  no  means  for  payment.  If 
Italy  could  secure  the  foreign  credits  with  which  to 
buy  the  raw  cotton,  she  has  the  mills  and  the  skilled 
hands  to  convert  it  into  suitable  fabrics  for  the 
Balkan  countries,  Asia  Minor,  and  points  further 
east.  But  she  lacks  the  credit  with  which  to  buy  the 
cotton,  while  these  old  markets  in  which  she  has  shown 
much  skill  are  closed  because  they  too  lack  the  credit 
with  which  to  buy  the  goods  which  they  so  much  need. 

In  recent  years  there  has  been  developed  in  North- 
ern Italy,  particularly  at  Turin,  Milan  and  Genoa, 
a  number  of  great,  efficient  industrial  organizations. 
The  story  of  one  of  these  is  as  splendid  a  romance  of 
industrialism  as  will  be  found  anywhere.  There  was 
one  man  in  the  industrial  life  of  Italy  who  resisted 
the  "  peaceful  penetration  "  of  German  capital.  He 
had  large  industrial  works  in  Genoa.  There  was  in- 
grained in  him  a  distrust  of  the  Teuton,  and  as  Ger- 
man capital  penetrated  to  other  industries  he  not 


ITALY  63 

only  resisted  any  advance  made  by  that  capital  for 
an  interest  in  his  business  but  he  instilled  into  his 
two  sons  what  became  almost  a  religion  of  chauvinism 
so  far  as  this  great  establishment  was  concerned. 
When  the  father  died  the  two  sons,  with  a  touch  of 
Italian  romanticism,  stood  at  the  bier  and  made  a 
stern  compact  one  with  the  other  that  they  would 
never  admit  German  capital  into  their  great  indus- 
trial inheritance.  In  these  two  men  there  certainly 
must  have  been  some  of  the  blood  of  the  Caesars,  for 
they  had  an  audacity,  an  imagination,  a  vision  for 
great  accomplishment  such  as  the  men  who  ruled 
early  Rome  must  have  had.  Theirs  was  the  one  great 
industry  in  Genoa.  They  developed  it  in  many  direc- 
tions. At  the  outbreak  of  the  war  it  and  various 
subsidiaries  had  become  stock  companies,  the  whole 
group  being  generally  known  as  the  Ansaldo  Com- 
pany, and  it  had  great  and  varied  industrial  capac- 
ity, running  through  shipbuilding,  the  making  of  tur- 
bines, the  construction  of  locomotives  and  the  build- 
ing of  electrical  machinery. 

With  Italy's  entrance  into  the  war  these  two  men 
had  the  imagination  to  realize  that  the  Great  War 
was  a  war  of  industrial  capacity.  A  speech  which 
Kaiser  Wilhelm  made  in  which  he  told  his  own  people 
that  the  war  would  be  won  in  the  workshops  of  Ger- 
many brought  to  them  a  revelation  regarding  the 


64.        WHAT  HAPPENED  TO  EUROPE 

character  of  the  war,  and  they  felt  that  they  had  in 
their  hands,  in  the  great  industrial  establishment  that 
they  controlled,  an  instrument  essential  to  Italy  if 
she  were  to  play  her  part  in  the  struggle  which  she 
had  entered.  Their  clear-eyed  view  of  German  na- 
tional characteristics,  their  hatred  of  German  domi- 
nation, made  them  see,  as  few  men  in  Italy  saw,  what 
the  struggle  meant  to  Italy  and  what  means  must  be 
employed  if  Italy  was  not  to  be  vanquished. 

They  offered  at  once  to  turn  their  establishment 
into  the  making  of  large  guns  for  the  army.  Per- 
haps, as  they  believed,  there  was  German  influence 
still  in  seats  of  power  in  the  Italian  Government. 
Perhaps  there  was  only  a  lack  of  vision,  but  in  any 
event  they  got  no  orders  for  guns.  Lack  of  orders, 
however,  did  not  daunt  them.  They  believed  they 
could  see  more  clearly  than  the  Government  saw. 
They  secured  from  Italy's  Allies  the  designs  of  the 
most  efficient  French  guns  and  without  a  single  order 
from  the  Government  and  in  the  very  first  days  of  the 
war  they  started  to  convert  their  plant  into  an  ord- 
nance establishment.  Before  they  received  an  order 
for  a  single  gun  they  had  completed  2,000  pieces  of 
ordnance.  Then  came  the  Caperetto  disaster.  And 
not  until  that  awful  defeat  did  the  Italian  Govern- 
ment turn  to  them  with  cries  for  guns.  When  the 
first  order  was  placed,  the  officials  were  confounded 


ITALY  65 

on  being  told  that  the  guns  were  ready  for  immediate 
delivery.  These  two  thousand  guns  were  at  once  put 
in  the  field  to  take  the  place  of  the  vast  losses  which 
the  Italian  army  had  sustained,  and  performed  a  feat, 
in  stopping  the  advance  of  the  Austrians  the  value 
of  which  can  hardly  be  measured.  The  Ansaldo 
Company  could  now  get  orders,  but  through  some  in- 
fluence, or  perhaps  only  through  financial  inability, 
they  could  not  get  pay.  The  orders  were  unceasing. 
The  pay  continued  elusive.  The  great  works,  how- 
ever, were  operated  to  their  utmost  capacity,  and 
performed  a  feat  that  those  in  America  will  marvel 
at,  who  know  by  experience  the  difficulties  of  ord- 
nance production. 

Works  that  employed  one  hundred  thousand  men 
were  created  and  ten  thousand  guns  were  put  in  the 
field.  At  one  time  the  Italian  Government  owed  the 
Ansaldo  organization  700,000,000  lire. 

The  matter  of  financing  the  situation  required  gen- 
ius, daring  and  substantial  strength.  The  capital  of 
the  company  was  increased  to  500,000,000  lire  and 
the  public  generously  subscribed  to  the  stock.  A 
great  combination  of  banks  was  created  in  order  that 
the  organization  might  control  and  be  aided  by  a 
bank  of  great  financial  strength. 

In  a  struggle  balanced  to  such  a  nicety  as  was  the 
Great  War,  when  Paris  was  saved  and  perhaps  the 


66        WHAT  HAPPENED  TO  EUROPE 

whole  cause  saved  by  the  opportune  arrival  of  a  hand- 
ful of  Americans  at  Chateau-Thierry,  it  can  be  justly 
said  of  each  of  many  factors  that  the  war  could  not 
have  been  won  without  this  or  that  particular  contri- 
bution. In  that  sense  it  seems  to  me  it  can  truly  be 
said  that  without  the  contribution  of  the  Perroni 
Brothers  and  of  their  industrial  organization  of  a 
hundred  thousand  men  that  they  brought  together 
in  the  Ansaldo  works  the  Great  War  could  not  have 
been  won.  For  Italy's  cause  would  have  been  lost 
and  with  that  loss  might  have  come  the  downfall  of 
the  great  cause.  But  now  what  of  the  future  of  this 
and  other  great  industrial  establishments  that  the 
war  developed  in  Italy? 

In  many  ways  Italy  struck  me  as  being  richer  in 
human  material  than  any  other  European  country 
that  I  visited.  These  Northern  Italians  seem  to 
have  a  genius  for  industrial  organization.  One  of 
the  great  industrial  plants  of  the  world  is  the  Fiat 
works  at  Turin;  and  there  are  a  goodly  number  of 
well-planned,  well-equipped  industrial  establishments 
in  Northern  Italy  that  have  at  hand  an  efficient, 
skilled  and  more  than  ample  labor  supply.  But  they 
must  have  coal  and  to  get  that  must  somehow,  and 
at  once,  have  the  power  to  pay  either  in  goods  or  in 
dollars  or  pounds  sterling.  It  is  not  a  matter  of  the 
individual  credit  of  these  industries.  It  is  not  at  all 


ITALY  67 

a  question  of  the  domestic  wealth  of  these  concerns. 
It  is  a  question  of  Italian  national  position  with 
respect  to  the  international  exchanges. 

Italy  as  a  national  unit  must  be  able  to  sell  to  the 
world  a  sufficient  amount  of  her  own  products  to  pay 
for  the  coal,  and  the  cotton,  the  wool,  the  petroleum 
products,  the  rubber  and  the  other  raw  materials 
which  she  must  have.  If  for  the  time  being  she  can- 
not do  that,  and  cannot  make  up  the  balance  from 
emigrants'  remittances  and  tourists'  expenditures, 
she  must  have  credits  or  her  industries  must  in  part 
close  down.  It  all  amounts  to  the  inevitable  logic 
of  two  plus  two.  There  is  no  getting  away  from  the 
few  fundamental  factors  that  are  involved  in  interna- 
tional trade.  To  buy  anything  abroad  Italy  must 
sell  her  own  products  or  make  loans  to  counteract 
the  lack  of  balance.  If  she  cannot  make  those  loans, 
things  essential  to  her  industrial  life  cannot  be  im- 
ported. Her  industrial  life  must  halt,  production 
cease,  workmen  stand  in  idleness  and  face  want.  But 
that  usually  spells  (whether  the  hungry  man  is  an 
Italian,  a  Russian,  an  Englishman,  or  God  forbid, 
an  American,  the  result  is  apt  to  be  the  same),  revo- 
lutionary outbreaks,  a  disorganization  of  the  social 
order,  industrial  chaos. 


CHAPTER  VII 

SPAIN 

THERE  is  a  corner  of  Europe,  cut  off  by  the 
Pyrennes  from  a  mixture  of  race  or  close  intercourse 
with  other  peoples,  which  has  been  wholly  outside  most 
of  the  baleful  effects  of  the  war,  and  which  stands 
to-day  in  a  unique  situation,  a  position  quite  unlike 
that  of  any  other  European  nation.  For  a  century, 
Spain  has  lived  her  life  much  to  herself.  Her  great 
world  ambitions  were  long  ago  forgotten.  The  brief 
sway  of  Napoleonic  influence  made  no  lasting  im- 
press and  gradually  she  has  relinquished  her  unhappy 
grasp  of  far  flung  colonial  possessions. 

The  Great  War  brought  to  Spain  almost  nothing 
but  profit.  She  had  an  unlimited  market  at  very 
high  prices  for  everything  that  she  could  spare. 
She  was  outside  the  iron  ring  that  closed  in  with 
crushing  pressure  on  Holland  and  the  Scandinavian 
countries  at  the  same  time  that  it  shut  in  the  Central 
Powers.  The  result  has  been  an  era  of  material 
prosperity  such  as  has  had  no  counterpart  in  Span- 
ish history  in  the  last  century.  With  much  to  sell 
and  comparatively  little  that  it  was  possible  for  her 

68 


SPAIN  69 

to  buy  because  of  lack  of  supplies  and  particularly 
because  of  lack  of  transportation  for  those  supplies, 
she  has  been  frugal  in  spite  of  herself,  while  the  war- 
ring nations  have  poured  into  her  lap  golden  treasure 
in  exchange  for  what  she  could  give  them.  The  re- 
sult is  that  there  lie  in  the  vaults  of  the  Bank  of  Spain 
in  Madrid  great  pyramids  of  bricks  of  gold  and  long 
rows  of  sacked  sovereigns  and  eagles.  There  is  now 
piled  in  that  vault  gold  to  a  value  of  $440,000,000, 
more  gold  probably  than  Spain  had  within  her  boun- 
daries even  in  the  days  when  Spanish  enterprise  ven- 
tured forth  to  the  Eldorado  of  the  newly  found  west- 
ern hemisphere. 

In  passing,  it  might  be  interesting  to  note  that  this 
great  store  of  gold  does  not  lie  within  doors  of  armor 
plate,  guarded  by  time  locks  such  as  are  commonly 
used  to  guard  comparatively  trifling  reserves  in  many 
an  American  bank  building.  I  was  taken  down  to 
the  bullion  vaults  of  the  Bank  of  Spain  accompanied 
by  four  elderly  guardians,  each  carrying  a  massive 
key.  These  four  keys  were  simultaneously  inserted 
through  the  ancient  escutcheons  and  a  door  which 
would  amuse  some  of  my  Sing  Sing  neighbors  if  they 
could  note  the  ease  with  which  they  might,  unaided 
by  any  keys,  pass  through  it,  was  thrown  open  on  a 
view  of  these  piled  masses  of  gold. 

The  period  of  prosperity   which    the   War   has 


70        WHAT  HAPPENED  TO  EUROPE 

brought  to  Spain  has  already  been  long  enough  to 
stamp  a  visible  impress  upon  the  whole  country. 
Fields  have  been  brought  into  agricultural  activity 
that  had  long  lain  fallow.  One  sees  miles  of  new  olive 
orchards  planted  with  baby  trees  now  two  or  three 
years  old,  interspersed  between  groves  of  olives, 
grown  so  old  that  their  youth  runs  back  to  the  time 
when  Napoleon's  ambitions  for  world  domination 
were  shattered. 

More  new  building  is  going  on  in  any  one  of  half 
a  dozen  cities  in  Spain  than  elsewhere  on  the  whole 
continent  of  Europe.  Easily  the  finest  hotel  in  Eur- 
ope is  in  Madrid.  Social  life  at  the  Spanish  capital 
is  more  brilliant  than  at  any  other  court  in  Europe. 
The  shops  of  the  cities  contain  everything  for  which 
there  has»been  room  on  over-laden  ocean  tonnage  to 
bring. 

There  are  some  fundamental  defects  that  stand  out 
sharply  to  any  one  making  a  study  of  Spanish  condi- 
tions. Many  of  the  problems  that  other  nations  have 
in  part,  at  least,  long  ago  solved  are  fresh  and  acute 
in  Spain  to-day.  The  Government  in  some  particu- 
lars is  bad  and  in  many  ways  is  inefficient.  There 
still  exists  a  privileged  class  of  nobles,  living  for 
pleasure  and  blind  to  the  responsibilities  of  their  posi- 
tion. Great  land  holdings  leave  large  sections  of 
agricultural  population  little  better  than  old  time 


SPAIN  71 

serfs.  The  level  of  wages  is  the  lowest  wage  scale 
existing  in  any  country  in  Europe  that  I  visited. 
The  common  laborer  in  the  cities  receives  about  3^ 
pesetas  a  day,  about  seventy  cents.  The  wages  of 
agricultural  laborers  are  still  lower,  while  the  indus- 
trial wage  scale  is  such  that  grave  industrial  unrest  is 
inevitable. 

Spanish  industry  in  the  main  is  confined  to  Bar- 
celona and  Bilbao.  Barcelona  is  historically  turbu- 
lent. The  Province  of  Catalonia  of  which  Barcelona 
is  the  capital  is  inhabited  by  a  race  that  has  ethnolog- 
ical variation  from  the  general  Spanish  type.  These 
people  speak  a  language  of  their  own  and  think  and 
act  differently  from  the  other  people  of  Spain.  Po- 
litically, Barcelona  presents  to  Spain  something  of 
the  same  problem  that  Ireland  does  to  Great  Britain. 
Their  aspiration  is  for  at  least  a  modified  home  rule 
and  the  answer  of  the  Cortez  to  that  invariably  has 
been  measures  of  stern  repression. 

So  there  is  a  political  foundation  for  unrest  in 
Catalonia  that  is  not  found  in  any  other  province, 
but  there  is  also  a  social  phenomenon  there  far  more 
interesting  and  significant  than  anything  that  has  its 
root  in  political  differences.  Barcelona  is  the  great 
manufacturing  center  of  Spain  for  almost  every- 
thing except  iron  and  a  great  percentage  of  its  pop- 
ulation is  made  up  of  wage-workers.  The  provincial 


72        WHAT  HAPPENED  TO  EUROPE 

characteristics  of  the  Catalonians,  their  independ- 
ence, their  disregard  for  authority,  their  progressive- 
ness,  have  all  found  play  in  creating  what  to  me  was 
the  most  menacing,  the  most  extraordinary,  the  most 
terrifying  organization  with  which  I  have  ever  come 
in  contact.  This  population  of  workers  is  dominated 
by  Syndicalists  and  in  Barcelona  I  learned  for  the 
first  time  what  Syndicalism  really  is. 

As  there  exemplified,  Syndicalism  proposes  no  com- 
promise with  the  present  order  of  society.  It  is  Bol- 
shevik in  its  aspirations  and  its  methods.  It  refuses 
to  accept  the  present  capitalistic  organization  of 
society  and  is  determined  to  overthrow  the  present 
social  order  completely  in  order  that  it  may  build 
a  socialistic  state  on  the  ruins  of  the  capitalistic 
state. 

Its  method  of  accomplishing  this  is  through  the 
agency  of  a  Syndicate,  an  organization  which  might 
be  described  in  one  sense  as  a  universal  trade  union, 
embracing  the  workers  of  all  trades.  Unlike  a  trade 
union,  however,  the  directing  force  is  shadowed  in 
complete  mystery.  No  one  knows  who  directs  the 
Syndicalist  movement  and  when  I  say  "  no  one,"  I 
mean  almost  literally  that  even ;  the  workers  who  are 
members  of  the  Syndicate  know  quite  as  little  as  do 
the  outsiders.  The  organization  partakes  of  the  se- 
crecy of  the  Molly  Maguires  and  of  the  terrorism  of 


SPAIN  73 

an  Italian  Mafia.  Somewhere  back  in  it  there  is  pre- 
sumably a  head  or  a  committee  but  who  composes 
that  directing  force  is  kept  a  secret  from  even  the 
active  workers  in  the  organization.  The  method  of 
communication  is  all  by  groups  of  twos.  Starting 
with  the  central  organization,  whatever  it  is,  it  is 
presumed  that  each  member  has  direct  relationship 
with  two  other  members  in  the  organization.  In 
turn,  each  of  these  other  members  have  direct  contact 
with  two  additional  members  and  so  on  in  arithmetical 
progression.  This  series  has  been  traced  back  by 
secret  agents  of  the  Government  through  fourteen 
different  strata  and  still  the  real  leaders  have  not 
been  reached.  General  strikes  are  called  merely  as 
a  sort  of  organization  gymnastics,  without  any  de- 
mands being  made  and  with  no  one  put  forward  with 
whom  negotiation  might  be  made  to  end  the  strike. 
Such  a  strike  may  last  a  day  or  a  week  and  as  sud- 
denly and  mysteriously  as  work  stopped,  it  will  be 
resumed.  All  this  is  done  to  impress  the  public  and 
to  train  the  organization. 

One  of  the  latest  phases  has  been  the  censorship 
of  newspapers.  The  newspapers  were  told  they  must 
submit  all  proofs  before  publication  and  that  if  they 
published  anything  unauthorized,  they  would  be  fined. 
Two  papers  were  fined  5,000  pesetas  each  for  print- 
ing official  orders  issued  by  the  Government.  If  they 


74        WHAT  HAPPENED  TO  EUROPE 

did  not  pay  the  fine  so  levied,  they  were  told  that  their 
presses  would  be  mysteriously  destroyed.  Even  if 
they  did  pay  the  fine,  as  happened  in  one  case,  there 
still  was  no  relinquishing  of  the  severity  of  the  cen- 
sorship. The  result  was  that  every  paper  in  Bar- 
celona ceased  publication  and  for  fifteen  days  prior 
to  the  time  I  was  there,  not  a  single  paper  had  been 
printed  and  the  only  news  of  the  world  which  the 
town  had  came  twenty-four  hours  old  in  the  Madrid 
papers.  Those  papers,  on  the  other  hand,  were 
Government  censored,  and  as  a  news  center,  Barce- 
lona did  not  present  a  brilliant  front. 

The  essence  of  the  Syndicalist  methods  as  exhibited 
in  Barcelona  is  assassination.  Up  to  the  time  I  was 
there,  there  had  been  72  employers  or  industrial  fore- 
men mysteriously  slain.  Not  a  single  conviction  had 
followed  this  great  number  of  murders.  Usually, 
even  no  arrests  were  made.  If  they  were,  witnesses 
and  juries  were  terrorized,  judges  were  threatened 
and  justice  totally  miscarried. 

There  was  clear  evidence  that  the  Syndicate  was 
receiving  monetary  aid  from  Russian  Bolshevists  and 
from  German  Socialists.  The  head  of  a  great  indus- 
trial organization,  an  American  who  had  formerly 
been  a  resident  in  Mexico,  told  me  that  in  Mexico  he 
had  known  a  German  who  was  there  a  man  of  wealth 
and  an  organizer  of  enterprises,  particularly  of  one 


SPAIN  75 

which  for  a  time  cut  a  large  figure  in  New  York  spec- 
ulative circles.  My  American  friend  discovered  this 
German  acquaintance  in  over-alls  at  work  in  a  ma- 
chine shop  in  Barcelona,  obviously  there  for  the  sole 
purpose  of  disseminating  German  propaganda  of 
unrest. 

Five  Russians  had  recently  landed  at  Barcelona 
saying  they  had  been  shipwrecked  and  presenting 
every  appearance  of  extreme  poverty  and  distress. 
It  was  discovered  that  they  had  under  their  clothing 
a  complete  lining  of  Spanish  pesetas.  I  was  told  the 
examination  of  a  branch  of  a  German  bank  located 
in  Barcelona  disclosed  payments  of  300,000  pesetas 
to  the  Syndicalist  representatives  and  at  the  time  I 
was  there,  the  manager  of  this  bank  was  presumed  to 
be  in  Government  custody. 

The  day  after  I  left,  the  civil  governor,  obedient  to 
threats  of  assassination  within  twelve  hours,  threw 
up  his  post  and  went  to  Madrid.  One  of  the  results 
was  the  fall  of  the  Romanones  Ministry.  The  day 
before  that,  I  had  had  a  long  talk  with  the  governor 
and  he  had  impressed  me  as  a  man  of  great  force  of 
character,  with  sound,  though  perhaps  not  very 
liberal,  views  regarding  social  conditions. 

Opposed  to  this  mysterious  organization  of  work- 
men, there  is  growing  up  what  we  would  term  a  Vigi- 
lantes but  what  is  called  in  Catalonia  a  Somatan. 


76        WHAT  HAPPENED  TO  EUROPE 

This  is  now  said  to  embrace  40,000  citizens  who  are 
banded  together  to  fight  the  sort  of  domination  the 
Syndicate  stands  for. 

In  Bilbao,  the  great  industrial  iron  center,  there 
has  been  no  outward  evidence  of  much  progress  in  the 
sort  of  organization  which  has  grown  up  in  Barce- 
lona. In  some  of  the  agricultural  districts,  the  Syn- 
dicalists' program  has  been  propagated  and  there 
have  been  some  strikes  timed  for  critical  moments  in 
the  agricultural  seasons.  But  on  the  whole  the  agri- 
cultural phase  of  the  Syndicalist  movement  did  not 
appear  to  be  far  enough  advanced  to  cause  much  ap- 
prehension. 

In  all  of  Spain  outside  of  Catalonia,  there  is  an 
enormously  potent  influence  for  conservatism  in  the 
Church.  Visiting  a  Spanish  cathedral,  compared 
with  a  visit  to  cathedrals  in  other  countries,  showed 
an  interesting  difference.  The  Spanish  cathedral 
was  in  every  case  what  might  be  termed  an  active, 
going  concern.  The  deep  hold  which  the  Church  has 
on  the  people  could  be  seen  here.  Nowhere  did  the 
churches  seem  merely  monuments  to  something  in  the 
past  but  rather  the  superb  housing  of  a  living,  active, 
potent  influence. 

Europe  nowhere  presented  a  more  interesting  field 
than  Spain,  to  watch  the  play  of  modern  forces  in 
their  reaction  upon  old  world  conditions.  Spain  is  a 


SPAIN  77 

store-house  of  natural  riches.  I  have  so  often  had 
travelers  tell  me  that  Spain  was  but  a  poverty- 
stricken  country  offering  but  the  meagerest  returns 
from  a  poor  soil  to  a  hard-working,  ignorant 
peasant  population.  I  cannot  believe  that  such  ob- 
servers have  seen  the  true  facts  and  when  one  finds 
that  there  were  cities  of  vast  population  in  Roman 
days  where  now  there  are  but  villages,  it  is  evident 
that  the  land  and  the  mines  yielded  so  amply  that 
Spain  might  well  have  been  looked  upon,  as  it  was, 
as  the  favorite  post  of  tax  gathering  consuls. 

I  was  told  by  authorities  whom  I  am  bound  to  be- 
lieve that  Spain  has  the  richest  undeveloped  resources 
to  be  found  anywhere  in  Europe ;  and  it  was  obvious 
that  better  agricultural  methods  would  further  in- 
crease what  is  already  a  very  large  agricultural  pro- 
duction. The  conservatism  of  the  Church  on  the 
one  hand  and  the  rapacity  of  the  nobles  on  the  other 
have  held  back  the  modernizing  of  Spain  so  that  out- 
side of  the  principal  cities,  one  feels  as  if  he  had  been 
transported  back  into  the  social  atmosphere  of  a 
century  or  two  ago. 

Spain  has  been  blessed  with  an  intelligent  monarch. 
Everywhere  I  heard  good  words  said  of  Alphonso 
XIII.  I  had  the  interesting  experience  of  an  hour's 
conversation  with  him,  a  conversation  hampered  by 
no  ceremonies  of  royal  dignity.  We  talked  over 


78        WHAT  HAPPENED  TO  EUROPE 

Spanish  and  European  conditions  with  the  same  free- 
dom that  one  might  have  talked  with  any  intelligent 
statesman  or,  I  think  I  would  rather  say,  with  an 
intelligent  business  man,  for  His  Majesty  showed  a 
knowledge  of  business  conditions,  indeed  a  technical 
grasp  of  questions  of  exchange  and  an  understanding 
of  the  principles  of  foreign  trade  such  as  a  good 
many  statesmen  would  be  quite  innocent  of.  The 
King  is  immensely  popular  with  the  army  but  has  to 
handle  one  of  the  most  chaotic  and  turbulent  complex 
of  political  parties  to  be  found  anywhere. 

The  fall  of  a  ministry  in  Spain  is  but  a  summer's 
day  event  but  now  the  process  of  forming  coalition 
ministries  has  reached  the  limit  of  even  Alphonso's 
astuteness.  When  Maura,  who  was  called  upon  to 
form  a  ministry  following  the  fall  of  the  Romanones 
Government,  was  unable  successfully  to  do  this,  a 
general  election  was  ordered  to  be  held  early  in  June. 

To-day  Spain  is  not  only  rich  in  natural  resources 
but  rich  in  available  liquid  capital;  but  her  capital- 
ists are  not  adventurous.  They  do  not  care  to  take 
the  chance  of  business  or  industrial  investments, 
knowing  perhaps  too  well  the  difficulties  that  enter- 
prise must  encounter  with  Government  circles  on  one 
side  and  under-paid,  dissatisfied  labor  on  the  other. 
There  are  in  Spain  the  resources  of  people,  of  agri- 
culture and  of  minerals  to  make  the  country  blossom 


SPAIN  79 

with  an  era  of  great  internal  development  and  pros- 
perity. 

I  have  indicated  a  little  of  what  some  of  the  things 
are  that  will  hamper  such  development.  What  the 
result  of  the  reaction  of  these  forces  may  be  I  would 
not  attempt  to  guess,  but  of  one  thing  I  am  certain. 
To  the  observer  of  social  business  conditions  there  is 
no  more  interesting  field  in  Europe.  It  is  worth 
while  observing  that  friendliness  on  the  part  of  the 
United  States  toward  Spain  will  encounter  striking 
friendliness  in  Spain  toward  America.  All  bitterness 
of  '98  seems  to  have  vanished  and  Spain  looks  to  the 
United  States  with  respect  and  admiration.  It  needs 
our  capital  less  than  any  other  country  in  Europe, 
but  Spaniards  are  quite  frank  in  saying  they  need  our 
industrial  leadership.  Men  of  high  character  and 
broad  capacity  will  find  a  congenial  atmosphere  in 
Spain  if  they  go  there  to  study  on  sound  lines  the 
great  business  opportunities  that  exist. 


CHAPTER  VIII 

BELGIUM 

BELGIUM  is  the  most  thickly  populated  country  in 
Europe.  Its  low-lying  fertile  fields  are  cultivated 
like  gardens,  its  country  roads  dotted  with  houses  un- 
til they  look  like  village  streets,  and  over  a  large  sec- 
tion of  the  country  one  is  never  out  of  sight  of  a 
village  or  a  city. 

The  Germans  did  horrible  material  harm  to  Bel- 
gium, harm  that  went  beyond  all  military  necessity, 
some  of  it  seemingly  done  in  madness  in  the  early 
days  when  Liege,  Louvain  and  Dinant  were  destroyed. 
Toward  the  end  of  the  war  theirs  was  a  destruction 
of  Machiavellian  cunning,  a  destruction  designed 
purely  to  prevent  what  might  be  left  of  Belgian  in- 
dustries from  coming  into  early  competition  with 
German  production. 

The  harm  that  was  done  in  Belgium  was  by  no 
means  entirely  material;  a  harm  was  done  to  the 
moral  fiber  of  her  people.  Four  and  a  half  years  of 
life  in  a  territory  occupied  by  such  an  enemy,  an 
enemy  so  ruthless  in  the  early  days  of  the  war,  was 
designed  to  strike  terror  into  every  Belgian  heart. 

BO 


BELGIUM  81 

Four  and  a  half  years  under  such  occupation,  with 
the  whole  normal  industrial  life  disorganized,  when 
the  question  of  securing  somehow  one's  daily  bread 
was  the  paramount  question,  and  the  bread  was  not 
to  be  secured  in  the  sweat  of  the  brow  but  only  by 
doles  and  distributions  —  when  that  situation  has 
been  borne  by  a  people  for  so  long  a  time,  an  im- 
pression of  it  will  be  left  that  no  terms  that  could 
be  written  into  an  armistice  will  remove.  So  it  is 
not  surprising  to  find  an  abnormal  social  situation 
in  Belgium.  And  still  an  observer  who  looked  only 
at  the  surface  of  things  would  see  well  tilled  fields, 
and  cities  presenting  a  normal  external  appearance. 
One  could  visit  Brussels,  Ghent,  Bruges  or  Antwerp 
and  be  pardoned  if  he  left  Belgium  convinced  that  the 
war  had  left  no  mark  and  the  country  was  ready  to 
go  on  with  its  national  life  from  the  point  where  it 
was  interrupted  in  1914.  That  being  so,  Americans 
must  be  warned  against  accepting  reports  of  their 
countrymen  indicating  a  normal  state  of  affairs  in 
Europe,  even  though  a  man  may  say  he  believes  what 
he  sees  with  his  own  eyes,  and  the  things  that  his  own 
eyes  actually  see  are  apparently  normal  occurrences 
of  ordinary  life. 

Belgium  has  a  population  of  7,500,000.  I  do  not 
know  what  statistics  would  give  as  the  number  of 
industrial  workers  prior  to  the  war,  but  at  a  guess, 


82        WHAT  HAPPENED  TO  EUROPE 

out  of  this  population,  the  industrial  workers  would 
not  have  numbered  much  over  one  million.  To-day 
the  Government  of  Belgium  is  paying  weekly  unem- 
ployment doles  to  more  than  800,000  workers.  This 
is  a  fair  indication  of  what  has  happened  to  one 
of  the  most  industrious  peoples  in  the  world.  But  I 
do  not  think  that  this  tells  the  whole  story.  Out- 
side of  the  few  cotton  mills  in  Ghent,  broadly  speak- 
ing, one  might  say  that  the  industry  of  Belgium  has 
ceased.  Furthermore  the  destruction  has  been  so 
complete  that  it  will  be  impossible  to  restart  industry 
in  anything  like  its  full  momentum  for  at  least  three 
years,  if  there  were  not  a  single  financial  or  political 
obstacle  in  the  way.  Buildings  in  many  cases  must 
first  be  torn  down  that  they  may  be  rebuilt,  for  they 
are  shattered  beyond  usefulness  and  encumber  the 
ground.  Machinery  is  in  every  state  of  wreckage. 
A  very  large  part  of  it  is  either  completely  wrecked 
or  has  disappeared  into  German  factories.  Practi- 
cally none  of  this  stolen  machinery  is  worth  re-trans- 
porting for  it  has  been  none  too  carefully  used,  and 
by  the  time  it  is  reinstalled  it  would  be  in  such  a  con- 
dition that  the  factory  equipped  with  it  would  be 
hopelessly  handicapped  from  the  first  blowing  of  its 
whistle. 

Prior  to  the  war,  Belgium,  to  an  even  greater  de- 
gree than  England,  existed  as  a  great  factory  com- 


BELGIUM  83 

munity,  importing  most  of  its  raw  material,  export- 
ing great  amounts  of  finished  goods,  and  paying  for 
imported  food  by  the  earnings  of  its  industries.  Bel- 
gian imports  of  foodstuffs  had  an  average  value  of 
$200,000,000  per  year  during  the  years  directly  pre- 
ceding the  war.  The  same  amount  of  food  would 
probably  now  cost  nearly  double  that  sum  in  dollars, 
while  the  dollar  which  costs  approximately  five  francs 
in  the  international  exchanges  of  the  normal  pre-war 
days,  now  costs  about  six  francs  and  a  half.  The 
future  relation  of  the  franc  to  the  dollar  no  one  would 
quite  venture  to  predict.  That  relation  marks  the 
inability  to  balance  import  needs  with  export  capac- 
ity. The  future  of  the  franc  is  not  bright. 

An  easy  optimism  is  apt  to  answer  to  this  and  to 
similar  cases  all  over  Europe  —  that  it  will  all  come 
right  in  time,  that  eventually  the  factories  will  be  re- 
stored, the  flow  of  exports  resumed,  that  the  con- 
sumptive demands  of  the  people,  for  the  time  being 
curtailed,  some  temporary  credits  found  to  ease  the 
immediate  lack  in  the  unbalanced  foreign  trade,  and 
that  in  the  end  we  will  witness  the  remarkable  power 
of  recovery  which  an  industrious  people  can  show. 
There  is  a  great  deal  in  that  view,  and  it  is  a  hopeful 
and  sane  way  of  looking  at  the  situation;  but  it 
leaves  out  one  extremely  important  and  essential  con- 
sideration. A  normal  man  needs  three  meals  a  day. 


84        WHAT  HAPPENED  TO  EUROPE 

That  need  is  immediate  and  he  cannot  *wait  for  an 
adjustment  which  will  come  "  in  the  long  run."  It  is 
in  the  insistence  of  the  human  stomach  that  the  pos- 
sible tragedy  to  European  civilization  lies.  The  hu- 
man stomach  cannot  wait. 

People  must  be  fed  or  they  die,  and  the  truth  is 
they  are  dying,  dying  in  some  parts  of  Europe  en 
masse.  The  figures  which  show  the  actual  deaths 
from  starvation  would  appall  America,  would  shock 
her  into  awakening  to  America's  responsibility  if  they 
could  but  be  comprehended.  Somehow  distance  dulls 
the  significance  of  facts.  We  are  told  about  whole 
regions  starving,  but  the  picture  is  so  unreal  viewed 
from  our  land  of  plenty  that  the  horrible  truth  does 
not  grip  us.  If  agricultural  America  could  but  vis- 
ualize agricultural  Russia,  a  great  grain  producing 
nation  which  exported  half  the  wheat  that  was 
shipped  into  Europe,  now  reduced  to  a  point  where 
several  hundred  thousand  people  are  dying  from  star- 
vation each  month  —  my  warrant  for  the  figures  is 
the  greatest  food  authority  in  the  world  —  then  our 
people  might  begin  to  apprehend  the  fact  that  there 
is  something  of  considerable  significance  the  matter 
with  Europe,  something  of  such  far-reaching  and 
fundamental  importance,  that  the  whole  fabric  of 
European  civilization  is  in  danger.  The  disorganiza- 
tion of  industry,  of  transportation  and  of  production 


BELGIUM  85 

has  so  thrown  out  of  balance  the  intricate  machinery 
of  civilization  that  there  is  safety  nowhere.  Every 
community  is  depending  upon  another  community, 
every  country  is  depending  upon  another  country, 
in  this  modern  mechanism  of  life  which  has  been  so 
completely  thrown  out  of  gear. 

Visualize  any  piece  of  great,  modern  machinery  — 
an  automobile  taking  a  smooth  road  at  thirty  miles 
an  hour,  a  printing  press  turning  out  the  nicely 
folded  sheets  of  a  great  daily  paper  at  the  rate  of 
twenty-five  papers  per  second,  or  an  electric  plant 
sending  energy  and  power  and  light  through  a  great 
city.  Disconnect  a  single  important  mechanical  fea- 
ture and  this  whole  mechanism  ceases  to  function  un- 
til the  mal-adjustment  is  corrected.  The  automobile 
halts  with  a  weary  stretch  of  road  ahead.  All  the 
cable  and  telegraph  wires  which  have  brought  the 
essence  of  the  world's  news  to  the  point  of  dissemina- 
tion, for  the  moment  become  useless.  A  whole  city 
can  be  thrown  into  darkness  by  an  accident  to  a  single 
lever  on  the  switchboard.  But  how  simple  are  these 
mechanisms  compared  with  the  mechanism  of  modern 
society,  and  how  slight  is  the  mechanical  misplace- 
ment as  compared  to  the  wrecking  of  the  essential 
features  of  the  great  industrial,  commercial  and 
financial  machinery  which  was  the  life  of  modern 
Europe. 


86        WHAT  HAPPENED  TO  EUROPE 

Coming  back  to  the  consideration  of  Belgium,  I 
will  again  emphasize  the  harm  which  has  been  done 
to  the  moral  fabric  of  her  industrial  population. 
For  four  and  a  half  years  they  'have  lived  a  dis- 
organized life  of  semi-idleness.  We  all  know  how 
hard  it  is  to  go  back  to  the  routine  of  work  after  a 
two  weeks'  vacation,  but  it  is  not  easy  to  picture  what 
happens  to  a  whole  people  who  for  more  than  four 
years  have  lived  an  abnormal  social  existence.  It  has 
been  said  with  a  good  deal  of  bitterness  that  there  are 
Belgians  who  have  lived  so  long  on  charity  that  they 
have  ceased  to  care  for  work.  Perhaps  that  is  true, 
and  so-  far  as  it  is  true  it  is  in  no  wise  surprising. 
The  character  of  these  people  has  borne  a  great 
strain,  their  normal  lives  have  been  disorganized  for 
a  distressingly  long  period.  Some  of  them  have  come 
to  look  upon  the  Government  treasury  as  a  bottom- 
less purse,  and  to  think  they  have  discovered  by  ex- 
perience that  legislative  enactments  rather  than  work 
can  support  a  people. 

It  seems  to  me  that  the  greatest  injury  that  Bel- 
gium has  suffered,  and  God  knows  the  total  list  is  an 
unparalleled  one,  is  in  the  deterioration  of  the  moral 
fiber  of  her  common  people.  How  quickly  that  can 
be  rebuilt  no  one  can  say.  The  inherent  desire  to 
right  wrong  tendencies  in  humanity  is  unmeasurable. 


BELGIUM  87 

For  the  moment  the  human  problem  is  one  of  the 
greatest  factors  in  the  rehabilitation  of  Belgium. 

The  situation  in  Belgium  is  by  no  means  all  black, 
however.  If  by  a  brief  contact  with  officials  one  may 
be  permitted  to  make  comparative  estimates,  I  would 
say  that  the  Government  of  Belgium  is  in  strong,  cap- 
able, patriotic  hands.  To  the  modesty,  seriousness 
and  ability  of  the  Belgian  monarch  half  the  world  has 
done  tribute.  The  present  Prime  Minister  and  Min- 
ister of  Finance,  M.  Delacroix,  struck  me  as  the  peer 
of  any  continental  statesman  I  met.  M.  Jaspar, 
Minister  of  Economic  Affairs,  is  a  man  of  deep  un- 
derstanding and  patriotic  determination,  with  a 
weariness  in  his  tired  eyes  that  tells  of  national  service 
the  personal  cost  of  which  was  not  counted. 

Belgium  has  a  further  great  asset  in  her  business 
men.  Some  of  them  have  gone  far  afield  to  create 
markets  for  Belgian  industries.  In  times  past  the 
securities  on  the  Belgian  stock  exchange  indicated  the 
investment  of  Belgian  funds  and  the  use  of  Belgian 
machinery  and  products  in  enterprises  that  are  lo- 
cated around  the  world.  It  struck  me  that  Belgium 
offered  an  opportunity  for  partnership  with  Amer- 
ica that  would  be  profitable  to  both  partners ;  Amer- 
ica to  furnish  capital,  machinery  and  some  supple- 
mentary mechanical  methods,  while  Belgium  furnished 


88   WHAT  HAPPENED  TO  EUROPE 

a  knowledge  of  international  industrial  affairs  and 
practical  experience  in  many  foreign  fields  and  a 
trained  intelligence  in  international  business  with 
which  we  are  but  scantily  supplied. 


CHAPTER  IX 

THE    INTERNATIONAL    SCALE-PANS 

COMMERCIAL  life  is  confronted  with  a  new  factor 
with  which  it  must  cope, —  the  fluctuation  of  In- 
ternational Exchange.  The  fluctuation  of  exchange, 
of  course,  is  nothing  new  in  itself ;  but  when  the  value 
of  the  currency  of  one  country  measured  in  the  cur- 
rency of  another  goes  through  such  a  wide  range  as 
is  experienced  in  current  quotations,  the  effect  is  felt 
throughout  the  farthest  reaches  of  commerce.  Meas- 
ured in  terms  of  our  money  there  has  been  a  fluctua- 
tion during  the  war  period  in  the  value  of  the  pound 
from  $7.00  to  $4.50,  of  the  franc  from  33%f*  to  15$, 
of  the  lira  from  25^  to  11^,  of  the  peseta  from  30^ 
to  18^,  and  of  the  guilder  from  52%^  to  39%^,  and 
all  this  to  say  nothing  of  the  fluctuation  of  the  mark, 
which  has  been  from  26^  to  17^,  and  of  the  kroner, 
which  has  been  from  47%^  to  24%^f. 

Take  a  nation  like  Italy,  for  example,  which  must 
import  every  ton  of  coal  that  runs  its  locomotives 
or  feeds  its  factory  boilers,  and  which  must  provide 
foreign  exchange  to  pay  for  all  its  raw  materials, 

nearly  all  of  which  is  bought  in  other  countries.     A 

89 


90        WHAT  HAPPENED  TO  EUROPE 

fluctuation  in  the  value  of  the  lira,  measured  in  dol- 
lars, becomes  a  matter  that  affects  every  peasant  and 
every  industrial  worker.  A  fall  in  the  value  of  the 
lira  must  immediately  be  reflected  in  the  rising  price 
of  everything  imported  and  indirectly  in  rising  prices 
of  domestically  produced  articles  that  have  some  re- 
lation to  the  cost  of  imports. 

So  the  question  of  "  The  Exchange  "  has  gone  be- 
yond the  minds  of  bank  employees  who  are  accus- 
tomed to  looking  at  the  financial  centers  of  the  world 
as  so  many  squares  on  a  chess-board  and  transferring 
balances  from  this  center  to  that  with  an  infinitesimal 
s'hade  of  profit  in  the  transaction.  These  were  for- 
merly the  men  chiefly  interested  in  foreign  exchange, 
and  all  that  the  public  knew  about  fluctuation  had  to 
be  learned  from  a  little  paragraph  at  the  end  of  the 
financial  article  giving  in  fine  type  the  leading  quota- 
tions, never  looked  at  by  the  ordinary  reader.  To- 
day "  The  Exchanges  "  affect  the  immediate  condi- 
tions of  the  daily  life  of  everybody  in  Europe  who 
has  to  buy  in  some  form  commodities  purchased  in 
foreign  countries. 

In  large  measure  the  urgent  demands  of  Europe 
to-day  are  for  purchases  to  be  made  in  America.  To 
make  these  purchases  the  buyer  must  have  dollar  ex- 
change. That  is  to  say,  he  must  be  able  to  make  the 
payment  in  current  funds  in  the  United  States  either 


THE  INTERNATIONAL  SCALE-PANS        91 

directly  as  an  importer  or  indirectly  by  way  of  giv- 
ing funds  into  the  hands  of  the  importer  to  pay  for 
his  importations.  As  the  dollar  rises  in  value  be- 
cause there  is  a  demand  for  it  not  counter-balanced 
by  a  demand  for  pounds  or  francs  or  lire,  there 
comes  into  the  minds  of  the  people  who  have  not 
ordinarily  dealt  in  the  subject  of  exchange  the  feel- 
ing that  the  Americans  are  charging  too  much  for 
their  dollars.  There  is  a  lack  of  clearness  of  think- 
ing surrounding  the  factors  of  this  exchange  prob- 
lem that  runs  all  the  way  from  workmen  to  finance 
ministers,  and  more  than  one  finance  minister  has 
spoken  to  me  in  complaining  tones  in  regard  to  our 
greediness  as  exhibited  in  the  high  rate  of  dollar  ex- 
change. I  have  had  finance  ministers  tell  me  that  the 
American  banks  ought  to  get  together  in  some  way 
and  supply  dollars  so  that  the  exchange  rate  would 
not  be  so  adverse  to  the  harassed  countries  who 
want  to  buy  our  goods. 

This  attitude  of  mind  looks  no  further  into  the 
subject  than  that  of  the  man  who  found  himself  in- 
convenienced by  extremes  of  weather,  and  inveighed 
against  the  thermometer.  A  thermometer  measures 
the  temperature.  It  does  not  create  it,  and  stoking 
the  furnace  is  obviously  the  thing  that  must  be  done 
rather  than  to  spend  time  grumbling  about  the  ther- 
mometer. Just  so  with  the  exchanges.  The  quota- 


92        WHAT  HAPPENED  TO  EUROPE 

tion  of  exchange  registers  the  direction  and  the  ex- 
tent by  which  the  total  importations  and  exportations 
of  a  country  are  out  of  balance.  It  is  no  more  a 
matter  that  can  be  corrected  by  bankers,  who  hap- 
pen to  be  the  men  who  hold  the  visible  gauge  that 
marks  the  fluctuations  of  the  exchanges,  than  the 
temperature  could  be  regulated  by  some  attempt  to 
control  the  movements  of  the  mercury  in  the  bulb 
of  the  thermometer  by  other  means  than  altering 
the  general  temperature  that  surrounds  that  instru- 
ment. 

One  might  compare  the  foreign  trade  movement  of 
a  country  to  a  set  of  balances.  Put  in  one  pan  of 
the  balance  a  weight  representing  the  value  of  all 
the  exports  from  a  country.  Put  in  the  other  pan 
a  weight  representing  the  value  of  all  the  imports 
into  the  country.  Now  if  the  scales  are  out  of  bal- 
ance how  can  they  be  adjusted?  The  direction  and 
the  amount  by  which  they  are  out  of  balance  will  be 
indicated  by  the  pointer  on  the  scale ;  but  that  pointer 
is  not  to  blame  if  it  points  to  a  figure  that  means  a 
serious  handicap  for  those  who  wish  to  buy  in  for- 
eign markets.  The  correction  must  be  made  by  the 
weights  in  the  balance  pans.  The  ways  in  which 
these  weights  may  be  varied  are  few  and  they  may  be 
easily  comprehended  if  one  will  but  think  of  the  fun- 
damental factors  involved.  In  the  main  the  correc- 


THE  INTERNATIONAL  SCALE-PANS        93 

tion  must  be  made  by  cutting  down  the  weight  repre- 
senting imports  or  adding  to  the  weight  representing 
exports.  When  the  deficiency  of  exports  was  slight, 
and  the  financial  mechanism  of  the  world  normal,  the 
correction  was  made  by  shipments  of  gold.  The 
shipment  of  gold  tended  directly  to  correct  the  bal- 
ance, first,  from  its  own  weight,  but  in  a  much  more 
important  measure,  from  its  indirect  effect.  When 
gold  was  shipped  out  of  a  country  interest  rates 
tended  to  rise  and  prices  to  fall.  The  markets  of 
that  country  became  more  favorable  to  buy  in  than 
to  sell  in,  and  the  country's  exports  increased  while 
its  imports  decreased.  Thus  the  balance  was 
brought  back  toward  the  normal.  Now,  however,  we 
have  a  situation  where  that  form  of  correction  can 
not  be  applied  or  can  only  be  applied  in  a  compara- 
tively small  degree  and  in  an  ineffective  way.  What 
else  can  be  done  to  adjust  the  weights  in  the  pans  so 
as  to  hold  in  check  that  tendency  of  exchange  rates 
further  to  fluctuate  from  the  normal?  A  nation  that 
faces  an  imperative  need  for  imports  and  that  has, 
for  the  time  being  at  least,  an  insufficient  amount  of 
exports  to  counter-balance  its  imports,  may  throw 
into  the  pan  with  its  exports  one  other  weight,  the 
weight  of  its  credit.  If  such  a  nation  can  make  an 
external  loan,  the  proceeds  of  that  loan  have  the  same 
effect  in  tending  to  bring  back  toward  the  normal  the 


94        WHAT  HAPPENED  TO  EUROPE 

exchange  rate  as  would  an  amount  of  merchandise 
exports  of  the  same  value  as  the  loan. 

If  the  out-of-balance  condition  is  only  a  temporary 
one  that  needs  but  the  progress  of  a  season  to  cor- 
rect, then  the  loan  may  take  the  form  of  bank  credits  ; 
and  the  function  of  international  bank  credits  is 
usually  that  of  correcting  temporary  out-of-balance 
conditions.  But  Europe  faces  a  situation  in  which 
its  demands  for  foreign  goods  must  exceed  its  ability 
to  supply  merchandise  for  export  for  a  good  while  to 
come,  certainly  for  a  longer  period  than  it  would 
be  safe  or  wise  or  possible  to  create  bank  credits  of 
sufficient  volume  to  counter-balance  the  deficiency  of 
exports.  There  must  exist,  therefore,  for  a  consid- 
erable period  a?  situation  in  which  most  of  the  coun- 
tries of  Europe  must  effect  term  loans  in  volume  suf- 
ficient to  make  up  the  deficit  between  the  utmost  these 
countries  can  export  and  the  minimum  of  imports 
upon  which  they  can  exist.  These  loans  must  have  a 
term  that  takes  them  out  of  the  category  of  bank 
credits  and  puts  them  in  the  form  of  investment  se- 
curities. 

Here  then  is  one  reason  why  America  must  be- 
come an  investor  in  foreign  securities.  Such  a  re- 
sult is  an  absolutely  inevitable  consequence  of  the 
situation  in  which  Europe  finds  itself  to-day.  Cer- 
tain imports  of  raw  material  Europe  must  have  to 


THE  INTERNATIONAL  SCALE-PANS        95 

continue  its  normal  life.  For  the  time  being  Europe 
has  little  or  no  goods  to  offer  in  exchange  for  the 
essential  raw  material  which  must  be  had  to  start  and 
feed  her  industries ;  and  so  she  must  fill  into  the  pan 
of  the  scale  along  with  her  deficient  exports  addi- 
tional weight  representing  foreign  credits. 

It  seems  to  me  that  the  foregoing  indicates  the 
true  factors  that  influence  foreign  exchange.  There 
is  no  legerdermain  of  finance  of  which  I  am  aware 
that  can  change  these  fundamental  factors,  and  any- 
thing that  appears  to  change  them  will,  I  believe, 
upon  analysis  be  found  to  fall  within  the  principles 
that  have  been  here  suggested.  We  have  had  the 
phenomenon  of  "  Pegged  Exchange "  which  might 
seem  to  offer  the  ground  for  belief  that  there  is  some 
way  of  controlling  the  temperature  by  controlling  the 
thermometer.  For  a  long  period  the  pound  sterling 
was  "  pegged."  That  is  to  say,  the  price  of  dollars 
in  the  London  market  or  the  price  of  pounds  in 
the  New  York  market  was  from  day  to  day  the 
same  and  the  quotation  was  "  pegged  "  at  a  fixed 
figure  through  some  power  exercised  by  the  British 
Government.  What  was  that  power?  It  was 
merely  this  in  its  ultimate  analysis:  The  British 
Government  stood  prepared  through  its  agents  to 
buy  all  the  exchange  offered  and  to  sell  all  the  ex- 
change demanded.  It,  in  a  measure,  controlled  the 


96        WHAT  HAPPENED  TO  EUROPE 

amount  of  dollar  exchange  that  its  own  traders  de- 
manded by  limiting  the  imports  of  goods  into  Eng- 
land and  thereby  limiting  the  demand  for  dollars  to 
pay  for  imported  goods,  but  as  the  two  pans  of  the 
scale  were  thrown  out-of-balance  by  an  excess  of  im- 
ports into  England  above  the  total  value  of  her  ex- 
ports, she  had  to  maintain  the  balance  by  creating 
government  credits  in  dollars.  This  was  done  first 
by  appealing  to  our  investment  market  and  later  by 
contracting  loans  directly  from  our  Government. 

England's  effort  to  "  peg  "  exchange  first  resulted 
in  the  necessity  of  exporting  to  us  $1,300,000,000 
of  gold.  So  that  in  the  first  instance  the  deficiency 
of  commodity  exports  was  made  up  by  an  export 
of  gold.  This  export  of  gold  had  a  double  pur- 
pose: first,  to  pay  a  deficient  balance,  second,  and 
quite  as  important  a  purpose,  to  flood  our  market 
with  gold,  keep  down  the  interest  rate  and  to  make 
possible  the  subsequent  borrowing  that  the  English 
Government  knew  would  have  to  be  done  in  order  to 
continue  to  keep  the  scales  balanced  and  the  price  of 
sterling  "  pegged."  When  the  flow  of  gold  was  ex- 
hausted Great  Britain  went  to  our  investment  market 
and  secured  about  $1,500,000,000  of  credit  to  throw 
into  the  deficient  pan.  Later,  after  war  was  declared 
by  America,  our  Government  made  huge  loans  to  the 
British  Government,  and  these  loans  week  by  week 


THE  INTERNATIONAL  SCALE-PANS        97 

were  dropped  into  the  pan  of  the  balance  along  with 
Great  Britain's  total  exports  in  just  sufficient 
amounts  to  hold  the  pointer  on  the  scale  at  4.76%,  as 
the  weight  in  the  other  pan  was  increased  by  her  con- 
stantly growing  imports. 

That  is  the  way  the  sterling  rate  was  pegged. 
The  rate  was  maintained  at  4.76%  only  because 
Great  Britain  continued  to  have  borrowing  ability 
sufficient  to  create  a  credit  equal  to  balancing  her 
deficiency  of  exports.  The  moment  that  borrowing 
ability  shall  cease  or  is  not  further  exercised,  any 
discrepancy  between  the  total  exports  and  total  im- 
ports will  make  itself  manifest  through  the  pointer  on 
the  scale.  That  is  to  say,  the  rate  will  be  no  longer 
"  Pegge(V  but  will  fluctuate  as  the  pans  of  the  scale 
are  put  out-of-balance. 


CHAPTER  X 

CREDIT 

CREDIT  is  so  delicate  a  thing  that  it  is  dangerous  to 
talk  about  it.  If  a  credit  is  to  be  weighed  and  ana- 
lyzed, and  the  chance  of  its  failing  to  be  repaid  ap- 
praised, the  not  unusual  course  of  the  conservative 
financier  or  investor  is  to  say  that  he  wants  nothing 
to  do  with  it. 

There  is  not  a  credit  in  Europe  to-day  that  does 
not  need  to  be  weighed  and  its  chance  of  repayment 
carefully  appraised,  but  it  will  not  do  for  America  to 
say  that  she  will  keep  her  dollars  at  home  hence- 
forth and  get  into  no  further  entangling  foreign 
financial  alliances.  One  American  financier  in  Eu- 
rope summed  up  his  view  of  the  situation  by  saying 
that  he  would  advise  his  partners  henceforth  to  keep 
very  close  to  shore.  My  reply  was  that  keeping 
close  to  the  shore  might  result  in  having  a  hole  stove 
in  his  boat.  America  cannot  keep  close  to  the  shore. 
We  are  launched,  whether  we  like  it  or  not,  in  the 
world's  currents.  We  have  moral  responsibilities 
that  should  and  will  appeal  to  us ;  but  if  we  only  look 
at  the  situation  on  the  narrowest  of  material  grounds, 

98 


CREDIT  99 

and  look  with  clear  vision,  we  will  understand  how 
involved  is  our  civilization  with  the  civilization  of 
Europe,  and  we  will  comprehend  what  it  will  mean 
if  by  failing  Europe  in  her  hour  of  great  need  we 
permanently  injure  the  fabric  of  civilization 
there. 

The  British  Chancellor  of  the  Exchequer  looks  for- 
ward to  British  taxpayers  facing  an  annual  budget, 
after  the  extraordinary  expenses  of  demobilization 
have  been  met,  of  £766,000,000,  which  is  £114,000,- 
000  more  than  he  can  foresee  as  likely  to  come  into 
the  Treasury  from  the  present  rate  of  taxation.  The 
cost  of  the  war  after  demobilization  will  astound  the 
world.  From  April  1,  1918,  to  the  day  of  the 
armistice  Great  Britain's  war  expenditures  were 
£7,442,000  per  day.  From  the  armistice  to  March 
31,  1919,  they  have  averaged  £6,476,000  per  day. 
From  the  armistice  to  April  1,  1919,  England  paid 
out  £52,000,000  in  gratuities  to  the  members  of  the 
forces  who  were  demobilized,  and  unemployment  doles 
absorbed  £13,000,000,  that  figure,  of  course,  being 
since  much  increased,  as  it  grows  by  one  million  and 
a  quarter  pounds  a  week. 

England  set  an  example  in  taxation  to  all  nations. 
In  the  year  ending  April  1,  1919,  34^/2  per  cent,  of 
her  total  expenditures  were  provided  by  taxes,  and 
for  the  five  years  of  the  war  ending  April  1,  1919, 


100      WHAT  HAPPENED  TO  EUROPE 


per  cent,  of  the  total  war  cost  was  provided 
from  revenue. 

At  the  outbreak  of  the  war  the  British  national 
debt  was  £645,000,000.  On  March  31,  1919,  it  was 
£7,435,000,000,  of  which  £6,085,000,000  was  inter- 
nal and  £1,350,000,000  external.  The  forecast  for 
the  year  ending  March  31,  1920,  indicates  an  ex- 
penditure of  £1,435,000,000,  and  a  revenue  of  £1,- 
160,000,000  with  a  deficit  to  be  met  by  borrowing  of 
£275,000,000,  although  the  Chancellor  prefers  to 
make  a  safer  estimate  and  put  the  new  loans  neces- 
sary as  totaling  three  hundred  million  pounds. 

That  does  not  measure  the  borrowing  the  Treas- 
ury faces,  however.  The  floating  debt  on  March  31st 
amounted  to  £1,412,000,000.  Most  of  this  is  in 
three  months  Treasury  Bills,  and  constant  appeals 
to  the  market  must  be  made  to  renew  these  floating 
obligations.  On  top  of  this  are  the  national  cur- 
rency notes,  demand  obligations  of  the  Government 
in  the  form  of  circulating  notes  which,  on  April  23, 
1919,  stood  at  £349,000,000,  and  were  supported  by 
a  gold  reserve  of  £28,500,000.  Their  amount  is 
steadily  rising.  The  aggregate  amount  of  legal  ten- 
der money  of  England,  which  at  the  beginning  of  the 
war  was  £214,000,000,  is  now  more  than  £540,- 
000,000. 

These  figures  take  no  account  of  the  obligations 


CREDIT  101 

owed  to  England  by  her  Allies  and  dominions.  These 
obligations  on  March  31, 1919,  amounted  to  £1,739,- 
000,000. 

As  Mr.  Chamberlain  wisely  observes,  the  hard, 
inexorable  economic  fajcts  of  Great  Britain's  financial 
position  are  obscured  by  a  fictitious  appearance  of 
wealth.  There  is  between  two  and  three  times  as 
much  legal  tender  money  in  circulation  as  there  was 
before  the  war.  The  deposits  of  the  joint  stock 
banks  have  more  than  doubled.  Almost  all  of  their 
additional  deposits  are  represented  in  their  port- 
folios by  short  dated  government  securities.  The 
average  figures  indicate  that  about  46  per  cent,  of 
British  bank  portfolios  are  in  government  obliga- 
tions. The  great  French  banks  by  comparison  show 
about  80  per  cent,  of  their  portfolios  in  government 
paper. 

I  am  not  going  to  burden  these  pages  with  any 
statistical  analysis  of  the  financial  position  of  the 
various  governments.  The  position  of  every  one  of 
them  that  was  directly  involved  in  the  war  may  be 
frankly  accepted  as  critical.  To  England  one  might 
perhaps  better  apply  the  word  "  difficult "  than 
"  critical,"  but  as  for  the  rest,  the  position  of  the 
domestic  bondholder  gives  promise  of  unpleasant 
eventualities  either  in  the  way  of  scaled  obligations 
or  depreciation  of  the  currency  in  which  the  debt  is 


102      WHAT  HAPPENED  TO  EUROPE 

measured,  or  of  such  a  direct  tax  as  the  voters  of 
Switzerland  have  just  imposed.  M.  Klotz,  the  Fi- 
nance Minister  of  France,  without,  one  fears,  a  clear 
economic  understanding  of  the  problem  proposed  a 
capital  tax  in  France.  The  proposition  met  with 
such  a  roar  of  opposition  that  it  was  dropped  almost 
as  soon  as  it  was  proposed. 

In  the  chapter  on  France,  I  have  given  some  indi- 
cation of  the  national  financial  burdens.  In  Italy 
the  national  debt  is  less,  but  its  crushing  weight  is 
proportionately  as  great,  particularly  in  view  of 
Italy's  comparative  poverty  in  natural  resources. 
When  we  turn  our  attention  to  Poland,  Lithuania, 
Czecho-Slovakia,  Jugo-Slavonia,  and  Greece,  to  say 
nothing  of  Germany,  Austria  and  Turkey,  the  situa- 
tion presented  in  each  case  is  desperate.  Just  how 
desperate  no  one  could  measure,  because  to-day  no 
one  knows  what  is  the  debt  of  any  of  those  countries. 
They  have  been  made  up  by  a  re-drawing  of  na- 
tional lines,  but  it  was  found  easier  to  draw  national 
lines,  infinitely  difficult  as  that  task  is,  than  it  was  to 
re-apportion  to  the  new  nations  with  a  just  allocation 
that  part  of  the  old  debt  of  the  nations  from  which 
the  new  countries  have  been  made. 

Anything  like  a  discussion  of  the  national  finances 
of  most  of  these  new  nations  with  a  view  to  definite 
action  is  wholly  impossible  until  the  governments 


CREDIT  103 

which  they  have  temporarily  set  up  have  been  for- 
mally recognized  by  the  great  powers,  and  that  rec- 
ognition, up  to  the  moment  when  this  is  written,  has 
not  been  definitely  given.  Such  nations  as  Poland, 
Lithuania  and  Czecho-Slovakia  might  conceivably 
go  to  their  own  nationals  in  America  and  raise  a  cer- 
tain amount  of  credits  without  having  the  basis  of 
those  credits  very  closely  scanned,  but  even  that  is 
impossible  until  the  United  States  has  officially  rec- 
ognized those  governments.  Rumania  has  a  better 
foundation  for  national  credit  than  the  other  smaller 
nations  mentioned  because  her  existing  debt  is  not 
overwhelming  and  her  resources  in  oil  and  agriculture 
are  very  great  indeed.  But  even  so,  she  is  not  at 
the  moment  in  a  position  to  command  even  a  part  of 
the  credit  that  she  vitally  needs. 

In  any  consideration  of  credits  in  Europe,  whether 
they  be  national  or  individual,  whether  they  be  se- 
cured by  claims  upon  the  German  indemnity  as  col- 
lateral or  offered  by  corporations  or  individuals  of 
wealth,  they  are  all  open  to  one  vital  objection. 
There  is  no  political  safety  in  Europe  anywhere  so 
long  as  there  is  left  any  country  unable  to  command 
a  sufficient  amount  of  credit  at  least  to  make  the 
beginning  of  an  attempt  to  restart  its  idle  industries. 
I  have  said  elsewhere,  but  it  cannot  too  often  be  re- 
peated, or  too  clearly  kept  in  mind,  that  paralyzed 


104      WHAT  HAPPENED  TO  EUROPE 

industry,  idle  workmen,  stoppage  in  the  flow  of  manu- 
factured things,  and  the  want  and  hunger  which 
must  follow  as  a  consequence,  all  of  which  is  empha- 
sized by  the  breakdown  of  domestic  transportation, 
speh1  Bolshevism. 

If  the  foregoing  is  a  correct  view,  then  Europe 
must  be  looked  at  as  a  unit  and  one  must  cease  trying 
to  find  a  nation  here  or  there,  or  a  loan  of  one  char- 
acter or  another  that  in  itself  is  thought  to  offer  a 
fair  basis  of  security.  There  cannot  be  security  in 
an  atmosphere  where  Bolshevism  is  contagious,  and 
where  an  outbreak  in  one  center  is  almost  certain  to 
be  communicated  to  adjacent  regions.  Any  attempt 
to  grant  credit  facilities  for  the  rehabilitation  of 
Europe  must,  I  believe,  be  so  comprehensive  in  its 
character  as  to  embrace  at  least  a  serious  effort  to 
restart  the  industrial  cycle  in  all  the  European  coun- 
tries. I  did  not  include  Russia  in  that  category  be- 
cause, for  the  time  being,  Russia  is  outside  the  pale 
of  capitalistic  consideration,  for  there  is  no  govern- 
ment with  which  capital  can  contract.  Bolshevist 
Russia  must,  for  the  present,  be  economically  iso- 
lated as  a  patient  too  dangerously  involved  with  con- 
tagion to  permit  any  financial  intercourse. 

Are  we  then  to  give  up  the  task  as  hopeless  and 
mark  the  whole  field  as  too  dangerous  for  timid  dol- 
lars to  enter?  My  answer  would  be  that  under  no 


CREDIT  105 

circumstances  should  we  do  that.  It  would  be 
morally  cowardly,  and  financially  more  dangerous 
than  would  be  an  intelligent  attempt  to  grapple  com- 
prehensively with  the  whole  problem. 

How,  then,  shall  we  take  hold  of  it?  If  we  can- 
not let  the  usual  principles  of  credit  govern  our 
financial  decisions,  if  all  Europe  is  so  knit  together 
that  we  must  be  guided  by  her  necessities  rather  than 
by  the  security  that  individual  countries  can  offer, 
how  can  we  make  a  beginning? 

In  the  first  place,  to  put  it  frankly,  Europe  is  in 
a  situation  where  to  my  mind  she  must  needs  give 
receiver's  certificates  for  the  credit  to  get  her  going 
again.  By  receiver's  certificates  I  mean  national  ob- 
ligations having  a  prior  lien  upon  the  national  in- 
come. It  would  perhaps  be  impossible  to  get  any  one 
of  several  nations  to  offer  such  security,  if  ap- 
proached individually,  but  I  believe  if  an  identical 
formula  were  presented  to  each  nation,  and  if  all 
were  alike  asked  for  a  prior  lien,  the  difficulties  of 
national  pride  would  be  more  easily  overcome. 

I  will  not  here  go  into  the  details  of  a  plan  which 
has  been  suggested  to  our  own  government  and  to 
leading  European  officials  and  financiers.  Perhaps 
before  these  pages  are  printed  that  plan,  or  some 
modification  of  it,  or  some  other  plan  that  recognizes 
the  principle  of  dealing  with  Europe  as  an  entity 


106      WHAT  HAPPENED  TO  EUROPE 

in  the  first  instance  of  granting  credit,  will  have 
been  agreed  to.  In  any  case,  events  are  traveling 
too  fast  to  make  the  pages  of  a  book  a  suitable  place 
for  such  a  current  discussion.  I  will  merely  pre- 
sume that  some  way  is  to  be  found  to  grant  the  first 
credits  that  are  so  vitally  essential  to  provide  each 
of  these  nations  with  a  certain  amount  of  machinery, 
raw  material  and  railroad  equipment  to  permit  a  be- 
ginning in  the  direction  of  restarting  the  industrial 
cycle,  and  I  will  pass  to  some  consideration  of  what 
the  next  step  may  be. 

Let  no  one  think  that  Europe  is  lacking  in  a  sound 
basis  for  obtaining  all  the  credits  that  the  lending 
nations  can  possibly  extend,  provided  Europe  gets 
fairly  started  back  on  a  return  to  normal  economic 
life.  Not  only  is  Europe  enormously  rich,  but  there 
is  inherent  in  the  present  situation  a  power  of  rapid 
recovery,  if  the  tangle  can  only  be  straightened  out, 
which  will  set  the  continent  in  the  direction  of  re- 
covery. If  industry  is  not  promptly  restarted  the 
possibilities  involved  are  too  black  to  picture,  but  if 
all  these  nations  can  be  faced  in  the  right  direction 
it  would  be  possible  to  wipe  out  most  of  the  scars  of 
war  in  an  amazingly  short  time. 

If  I  read  the  situation  aright,  there  is  to  be  a  new 
type  of  financial  relationship.  Europe  lacks  credit, 
but  it  has  something  that  America  lacks.  It  has  ex- 


CREDIT  107 

perience  and  an  understanding  of  international  in- 
dustrial business  which  goes,  in  many  instances  far 
beyond  our  own  experience.  It  seems  to  me  that  this 
should  be  the  best  of  grounds  for  a  partnership  in 
commercial  and  industrial  affairs.  We  would  bring 
to  the  partnership  capital  and  a  certain  amount  of 
imagination  and  vigor,  while  the  Europeans  would 
bring  an  industrial  plant  and  a  commercial  organiza- 
tion thoroughly  experienced  in  fields  where  we  have 
not  adventured. 

The  cotton  mills  of  Italy  give  an  outlook  into  the 
Near  East,  and  I  believe  it  would  be  greatly  to  the 
advantage  of  cotton  interests  ambitious  to  extend 
markets  in  that  direction,  to  work  with  Italian  cotton 
mill  interests.  The  Italians  have  been  extremely 
clever  of  late  years  in  the  production  of  cheap  goods 
for  the  Near  East.  They  have  an  abundance  of 
labor.  They  lie  on  a  route  between  our  cotton  fields 
and  the  ultimate  market,  and  they  know  the  market. 

Belgium  has  done  successful  industrial  engineering 
quite  around  the  world.  She  has  strong  men  with 
practical  experience  of  construction  and  installa- 
tion over  the  widest  territory.  They  have  a  great 
number  of  plants  of  one  sort  and  another  operating 
in  almost  every  important  country,  and  they  have 
many  projects  in  hand  that  have  been  studied,  some 
of  which  are  ripe  for  execution.  There  could  be  a 


partnership  of  American  capital  and  industry 
formed  with  Belgian  experience  in  industry  which 
might  play  a  great  international  role. 

There  is  no  more  dreadful  error  to  be  made  by 
America  than  narrowly  to  conclude  that  foreign 
trade  means  merely  selling  our  products,  and  to  close 
our  minds  to  the  idea  of  helping  rehabilitate  and 
making  future  markets  for  the  product  of  European 
industry.  Some  may  hold  the  opinion  that  a  loan 
of  credit  to  rehabilitate  industry  in  Europe  would 
be  merely  a  loan  to  help  our  industrial  competitors 
more  quickly  to  get  back  to  a  position  where  they 
can  outstrip  us  in  competitive  markets,  and  there- 
fore we  had  best  keep  our  credits  at  home  and  push 
our  present  commercial  advantage.  It  seems  to  me 
that  this  conception  is  as  seriously  wrong  as  possi- 
ble. Foreign  trade  is  interchange,  and  distinctly 
not  to  be  conceived  of  as  merely  selling  by  one  coun- 
try to  other  countries.  As  European  industry  is 
rehabilitated,  and  as  surplus  products  are  made  that 
can  be  exchanged  for  the  surplus  products  of  other 
countries,  the  world  will  get  back  to  something  like  a 
normal  life. 

For  the  moment,  the  world  has  no  conception  of 
how  disorganized  its  affairs  are  as  a  result  of  this 
disorganization  of  European  industry,  because  for 
the  moment  there  are  effective  demands  that  pretty 


CREDIT  109 

well  take  up  any  slack  there  is  in  productive  capac- 
ity anywhere.  The  credits  will  be  quickly  exhausted 
upon  which  much  of  the  purchasing  has  been 
done  in  international  markets  in  the  first  six  months 
since  the  armistice,  and  the  new  credit  may  be  slow 
of  creation.  For  a  time  international  trade  must  be 
moved  by  credits,  because  Europe  is  in  no  position 
to  produce  exportable  surpluses  of  anything  in  ap- 
preciable amounts  and  therefore  will  not  have  nor- 
mal amounts  of  goods  to  exchange  for  other  goods 
until  the  industrial  processes  and  the  former  reac- 
tions in  demand  of  one  industry  upon  another  have 
been  set  in  motion. 

Of  course,  banking  credits  will  ultimately  come 
into  the  picture,  but  there  are  great  misconceptions 
in  the  minds  of  government  officials,  of  business  men, 
and  I  would  even  venture  to  say  in  the  minds  of  some 
bankers,  as  to  the  proper  function  of  bank  credit 
in  such  a  situation  as  the  present  one.  I  have  always 
felt  that  it  was  salutory  to  look  at  a  bank,  not  as  an 
inexhaustible  fountain  of  credit,  but  rather  as  the 
greatest  debtor  in  the  commercial  world.  We  are 
apt  to  speak  of  the  resources  of  a  bank  instead  of 
that  exactly  counter-balancing  figure,  its  liabilities ; 
and  borrowers  at  least  do  not  keep  clearly  in  mind 
that  the  banks  are  the  greatest  borrowers  of  all,  and 
that  they  owe  all  of  their  resources,  except  the  mod- 


110      WHAT  HAPPENED  TO  EUROPE 

est  percentage  that  represents  their  capital;  and, 
more  than  that,  stand  committed  to  the  repayment 
of  their  debt  on  demand.  All  this  means  that  wise 
bankers  will  not  tie  up  in  long  term  credits  the  funds 
that  they  owe  to  depositors  on  demand.  The  credit 
that  represents  goods  in  transit,  raw  material  in 
process  of  manufacture,  products  moving  directly 
into  consumption  is  the  ideal  form  of  credit  for  bank 
loans.  All  credits  that  inherently  have  in  them  the 
power  of  self-liquidation,  is  the  proper  use  for  bank 
resources. 

When  a  bank  begins  to  loan  against  a  commodity 
in  transit,  and  further  agrees  to  renew  those  loans 
for  a  period  of  a  year  or  two  after  the  commodity 
that  formed  the  original  basis  of  the  loan  has  passed 
into  consumption,  the  bank  has  engaged  in  financing 
rather  than  banking.  If  it  takes  on  much  of  this 
character  of  business  it  is  on  dangerous  ground. 
Personally,  I  believe  one  of  the  few  serious  errors, 
in  disregard  of  the  sound  principles  of  banking, 
which  the  Federal  Reserve  Board  has  made,  has  been 
to  permit  the  rediscounting  of  bills  that  have  been 
drawn  under  agreements  to  renew.  Such  bills  cease 
to  have  any  self-liquidating  character,  after  the 
goods  against  which  they  were  drawn  passed  into 
consumption  while  the  payment  of  the  original  bill  is 
extended. 


CREDIT  111 

The  role  that  American  banks  can  play  in  the 
credit  situation  in  Europe  is  of  vast  importance,  and 
if  they  will  hold  firmly  to  the  lines  of  sound  commer- 
cial banking  it  is  a  role  which  they  can  play  with  se- 
curity and  profit.  Never  was  there  greater  need, 
however,  for  a  firm  grip  by  bankers  on  the  funda- 
mental principles  of  sound  banking.  There  will  be 
presented  most  attractive  opportunities  to  make  bank 
loans  under  conditions  and  for  terms  that  will  take 
the  loan  out  of  the  category  of  proper  banking  and 
put  it  into  the  form  of  financing.  If  bankers  are 
firm  in  adhering  to  principles  they  will  leave  such 
loans  to  be  worked  out  in  other  ways  and  will  per- 
form their  true  function  by  making  loans  that  have 
within  themselves  the  inherent  power  of  self-liquida- 
tion. 

I  am  quite  aware  that  great  and  apparently  suc- 
cessful systems  of  banking  have  been  built  up  on 
the  continent  in  apparent  disregard  of  the  princi- 
ples which  I  have  here  been  emphasizing.  The  Ger- 
man banks  were  deeply  interested  in  German  indus- 
try. The  same  is  true  in  a  measure  of  Italian  banks 
to-day.  In  France  too  little  encouragement  has 
been  given  to  industry  by  the  banks  and  too  much 
emphasis  has  been  laid  upon  the  profits  made  by 
floating  securities.  If  some  of  the  billions  of  French 
capital,  which  under  the  stimulation  of  banking 


112      WHAT  HAPPENED  TO  EUROPE 

propaganda,  found  its  way  into  Russian  and  Turkish 
loans,  had  been  invested  in  French  industry,  the  pres- 
ent position  of  France  would  be  less  unhappy.  In 
England  the  sound  traditions  of  commercial  banking 
have  been  much  more  closely  adhered  to  than  on  the 
continent,  but  England  is  now  off  the  gold  basis  and 
her  banks  are  encountering  obstacles  in  the  field  of 
world-banking  which  seemed  very  difficult  to  sur- 
mount. 

American  bankers  have  an  opportunity  in  the 
field  of  world-banking  brilliant  beyond  any  concep- 
tion which  they  have  heretofore  had.  If  they  will 
rise  above  the  provincialism  in  which  they  have  been 
trained  and  still  hold  firmly  to  the  principles  of 
sound  commercial  banking,  the  role  which  they  will 
play  in  the  future  world  of  finance  has  no  limit  that 
I  can  see. 


CHAPTER  XI 

"  COMFOET   AND    IJBEETY  " 

THE  motto  of  the  chief  Syndicalist  organization  of 
to-day,  the  Confederation  Generale  du  Travail  of 
France,  consists  of  two  words  — "  Comfort  and  Lib- 
erty." Here  is  the  key  to  an  understanding  of  the 
greatest  problem  of  the  age,  the  labor  problem.  If 
one  will  grasp  in  their  significance  what  these  two 
words  connote  in  the  mind  of  labor,  he  will  have 
pretty  much  the  whole  story  of  labor's  aspirations. 
By  comfort  is  meant  a  larger  share  in  the  earnings 
of  industry;  by  liberty  is  meant  a  less  subordinate 
position  in  industrial  surroundings  and  social  status. 
It  has  been  keenly  observed  that  the  aspirations  em- 
bodied in  these  claims  have  been  ripened  by  the  war, 
which  has  quickened  the  consciousness  of  merit  in 
the  laboring  classes. 

A  man  who  has  had  enormous  experience  during 
the  war  in  handling  the  English  labor  situation,  Sir 
Lynden  Maccassey,  sums  up  the  essentials  to  peace 
in  industry  under  the  three  headings  of  Contentment, 
Cooperation,  and  Production. 

The   factors   on  which   contentment   depends,  he 
113 


114      WHAT  HAPPENED  TO  EUROPE 

says,  are  in  their  respective  order  of  importance: 

1.  Security  of  employment. 

2.  A  voice  in  fixing  conditions  of  employment. 

3.  Remuneration  and  a  fair  division  of  profits. 

4.  Working  hours. 

5.  Prevention  of  profiteering. 

6.  Housing. 

7.  Economic  education. 

8.  Opportunity  to  rise. 

The  factors  on  which  cooperation  turn  depend  on : 

1.  Elimination  of  suspicion. 

2.  Creation  of  confidence  between  employer  and 

employee. 

3.  Recognition  of  their  mutual  community  of 

interest. 

4.  Machinery  for  facilitating  cooperation. 

The  final  factors  upon  which  production  primarily 
depends  are: 

1.  Economic  education. 

2.  Modernization  of  their  methods  by  employers. 

3.  Repudiation  by  labor  of  limitation  of  out- 

put and  of  demarcation  restrictions. 

The  significance  in  this  catalog  is  the  arrange- 
ment in  respect  to  the  order  of  importance  of  the 
different  factors.  Only  preceded  by  the  factor  of 
the  security  of  employment  is  the  weight  given  to 


"  COMFORT  AND  LIBERTY  "          115 

having  a  voice  in  fixing  the  conditions  of  employment. 
That  I  believe  is  giving  its  just  weight  to  this  aspira- 
tion of  labor.  I  found  the  situation  the  same  in 
every  labor  community  where  I  had  the  opportunity 
to  observe  conditions.  There  is  a  determination  on 
the  part  of  labor  to  have  more  to  say  about  conditions 
of  its  job.  No  matter  in  what  country  one  studies 
this  all  important  matter  he  will  find  the  wage  ques- 
tion is  subordinate  to  the  question  of  the  workers' 
status.  There  is  a  determination  to  have  a  larger 
share  in  the  profits  of  industry,  but  there  is  even  a 
stronger  determination  to  see  to  it  that  society  no 
longer  regards  labor  as  a  mere  commodity,  and,  in- 
stead of  that,  that  society  shall  grant  to  labor,  not 
as  a  concession  but  as  a  right,  a  voice  in  determining 
immediate  industrial  surroundings,  rules  and  regu- 
lations under  which  labor  will  work. 

There  is  to-day  nothing  short  of  chaos  in  Euro- 
pean industry.  One  phase  of  it  is  manifest  in  the 
enormous  unemployment  encountered  in  every  coun- 
try except  Spain.  In  England  one  million  workers 
receive  a  million  and  a  quarter  pounds  a  week  in 
"  unemployment  wages,"  and  in  addition  England  is 
subsidizing  wheat  by  selling  it  for  less  than  it  cost, 
so  that  this  form  of  contribution  is  costing  the  na- 
tion fifty  million  pounds  per  annum.  The  present 
unemployment  figures  it  is  thought  are  certain  to  in- 


116      WHAT  HAPPENED  TO  EUROPE 

crease.  In  Belgium  the  percentage  of  unemployment 
is  far  more  serious  with  800,000  in  that  compara- 
tively small  community  receiving  "  unemployment 
wages."  The  situation  in  France  and  Italy  is  little 
better.  The  effect  on  the  industrial  life  of  the  na- 
tion of  this  system  of  unemployment  doles  would 
make  in  itself  the  basis  of  an  illuminating  study.  No 
matter  how  serious  consequences  one  may  trace  as 
likely  to  follow  these  vast  national  disbursements,  it 
may  as  well  be  admitted  on  the  start  that  they  were 
absolutely  necessary.  If  the  war  industry  had 
ceased  and  armies  had  been  demobilized  to  return  to 
hunger  and  idleness,  the  foundation  of  the  capitalistic 
order  would  have  crumbled.  There  is  perhaps  a 
question  as  to  the  wisdom  of  paying  the  unemployed 
without  exacting  anything  in  return,  although  the 
difficulties  of  organizing  any  national  work  that 
would  have  absorbed  this  labor  in  a  way  that  would 
not  have  been  too  obviously  making  a  man  perform  a 
useless  task,  would  have  been  it  must  be  admitted 
very  great. 

In  England  the  weekly  unemployment  dole  is  29s 
to  men  and  25s  to  women,  with  an  additional  amount 
for  each  dependent  child.  This  is  a  sum  certainly 
none  too  large  to  maintain  a  self-respecting  stand- 
ard of  living,  although  it  is  larger  than  were  the 
wages  for  a  full  week's  labor  in  many  lines  prior  to 


"COMFORT  AND  LIBERTY"          117 

the  war.  It  is  admitted  by  every  one  that  the  sys- 
tem is  being  abused,  that  men  are  declining  to  work 
because  they  would  rather  loaf  and  draw  the  dole. 

Under  the  rules  of  administering  this  unemploy- 
ment fund,  the  Government  must  present  to  a  man 
an  opportunity  to  labor  at  his  particular  trade  be- 
fore it  may  cut  off  his  claim  to  the  unemployment 
gratuity.  There  is  in  England  an  extraordinary 
immobility  of  labor  as  between  the  various  trades, 
and  an  extremely  sharp  line  of  demarcation  in  re- 
spect to  which  trade  a  certain  kind  of  work  falls. 
It  naturally  follows  that  there  are  many  stories  re- 
lated of  how  men  decline  to  work  at  this  job  or  that 
because  such  job  does  not  fall  exactly  within  the 
defined  limits  of  their  particular  trade,  and  the  men 
sit  idly  consuming  Government  charity  while  useful 
tasks  remain  unperformed. 

A  man  of  very  high  position  in  the  financial  world 
of  the  city  told  me  this  story.  A  man  had  been  in 
his  employ  as  a  gardener,  but  left  that  work  to  be- 
come a  repairer  of  roads.  Municipal  economies 
stopped  road  repairing  and  the  laborer  began  to 
draw  his  unemployment  wage.  Having  a  large  fam- 
ily his  weekly  income  from  the  Government  amounted 
to  36s.  My  friend  met  his  former  employee  and  of- 
fered him  35s  to  resume  work  in  his  garden.  This 
he  hotly  declined  as  he  said  he  was  receiving  36s  for 


118      WHAT  HAPPENED  TO  EUROPE 

doing  nothing.  My  friend  then  appealed  to  the  au- 
thorities and  charged  them  with  wasting  the  tax- 
payers' money,  but  they  replied  that  this  man  was 
registered  as  a  road  repairer,  and  they  were  bound 
to  find  him  a  position  as  a  road  repairer  and  pay 
him  unemployment  wages  until  they  succeeded. 

This  tale  was  told  to  me  for  the  purpose  of  throw- 
ing light  on  the  abuses  that  were  going  on  under  the 
unemployment  act.  As  a  matter  of  fact,  while  the 
story  may  be  useful  for  the  purpose  intended,  it  is 
even  more  illuminating  because  of  the  light  that  it 
throws  on  the  attitude  of  employers.  A  man  of 
wealth  owning  an  extensive  country  place  and  at- 
tempting to  command  the  labor  of  a  man  who  had  a 
large  family  to  support  by  offering  him  35s  a  week 
with  the  present  cost  of  living  in  England  taken  into 
account,  was  trying  to  get  his  gardening  done  at  a 
wage  that  must  have  meant  the  barest  subsistence  to 
the  worker.  There  are  easily  two  points  of  view 
from  which  to  regard  the  employee's  refusal  to  give 
up  his  36s  a  week  of  unemployment  dole  in  order  that 
he  might  earn  in  .the  sweat  of  his  brow  a  wage  below  a 
point  that  would  support  his  family  at  a  minimum 
standard  of  existence. 

Another  difficulty  that  is  encountered  in  the  ad- 
ministration of  the  unemployment  fund  is  met  in  the 
large  number  of  women  who  were  formerly  in  domes- 


"  COMFORT  AND  LIBERTY  "          119 

tic  service,  but  who  entered  industry  during  the  pres- 
sure for  war  production.  They  register  as  machin- 
ists or  at  least  as  skilled  industrial  hands;  they  de- 
cline again  to  accept  domestic  service,  and  the  Gov- 
ernment finds  itself  in  the  position  of  supporting 
them  while  the  English  mistress  is  in  despair  because 
of  her  inability  to  get  servants. 

The  effect  on  moral  character  of  these  huge  Gov- 
ernment disbursements  to  the  unemployed  raises  ex- 
tremely serious  considerations.  There  has  been  an 
awakening  consciousness  in  regard  to  society's  re- 
sponsibility for  unemployment  and  there  is  little  like- 
lihood of  European  industry  returning  to  its  pre- 
war situation  in  which  the  lack  of  security  for  labor 
was  always  uppermost  in  labor's  mind.  The  unem- 
ployment doles  are  in  no  sense  regarded  by  their  re- 
cipients as  charity,  but  rather  as  a  human  right 
which  should  be  one  of  the  first  charges  on  the  public 
purse.  Economic  ignorance  leads  men  to  think  that 
the  public  purse  is  bottomless,  and  that  their  Gov- 
ernment, if  not  the  world,  owes  them  a  living.  They 
feel  that  they  are  not  necessarily  bound  to  do  any 
work  in  order  to  collect  the  debt. 

Employers  generally  admit  the  necessity  and  the 
justice  of  a  national  unemployment  scheme,  but  they 
universally  feel  that  the  plan  should  be  contributory, 
and  that  employers  and  employees  and  the  nation 


120      WHAT  HAPPENED  TO  EUROPE 

should  each  bear  a  part  of  the  burden.  There  are 
some  trade  unionists  who  strongly  object  to  a  con- 
tributory system  and  even  declare  the  present  system 
is  unjustly  administered,  their  aspiration  being  for 
grants  from  the  government  in  case  of  unemploy- 
ment, the  grants  to  be  made  direct  to  the  labor 
unions  and  to  be  distributed  by  them. 

It  seemed  to  me  that  the  most  important  thing  for 
American  employers  to  grasp  is  the  significance  at- 
tached by  workingmen  to  bettering  their  social  status 
in  industry.  At  home  I  try  never  to  miss  an  oppor- 
tunity to  gain  enlightenment  on  the  workmen's  point 
of  view,  and  I  have  been  increasingly  impressed  with 
their  desire  for  a  larger  voice  in  management.  They 
do  not  want  a  voice  either  in  the  management  or  the 
responsibility  of  the  business  office,  but  they  do  want 
more  to  say  about  the  immediate  industrial  conditions 
in  which  they  work.  I  am  thoroughly  convinced  that 
that  aspiration  is  now  world-wide  and  that  America 
will  feel  the  demand  as  strongly  as  it  is  now  being 
felt  in  Europe.  I  believe  ft  is  a  demand  that  Ameri- 
can employers  should  heed,  and  that  it  should  be  met 
not  merely  by  forced  and  grudging  concessions  but 
rather  from  the  point  of  view  which  is  now  held  by 
many  English  employers.  It  is  declared  that  what 
the  men  want  is  to  be  treated  as  intelligent  partici- 
pators in  industry,  to  be  consulted  and  to  have  things 


"  COMFORT  AND  LIBERTY  "          121 

explained  to  them.  It  is  a  reasonable  and  logical 
claim,  and  employers  themselves  believe  they  will  have 
to  concede  it. 

English-  employers  believe  that  production  hinges 
on  contentment,  that  contentment  cannot  be  secured 
merely  by  wages,  and  that  if  labor  is  given  a  larger 
voice  in  the  management  of  the  purely  industrial  con- 
ditions of  the  shop,  there  will  be  not  only  a  growth 
in  contentment,  but  there  will  be  a  cooperative  spirit 
in  which  men  will  bring  their  brains  as  well  as  their 
muscles  to  the  task  of  production.  They  feel  that 
from  capital's  point  of  view  every  such  concession 
made  will  be  far  more  than  compensated  in  the  in- 
creased production  secured. 

The  war  resulted  in  the  relinquishment  by  union 
labor  of  many  of  its  rules  which  have  in  a  steadily 
increasing  degree  hampered  industry.  There  is  still 
a  widespread  economic  fallacy  in  labor  circles,  how- 
ever. Labor  believes  that  a  restriction  of  output  is 
beneficial  to  the  worker.  The  effect  of  that  fallacy 
is  again  coming  sharply  into  evidence.  There  is  a 
widespread  belief  among  workers  that  industry  can  be 
carried  on  with  much  shorter  hours,  that  men  may 
receive  still  higher  pay  for  the  shorter  day,  and  that 
all  this  can  be  accomplished  without  any  detriment 
to  industry,  purely  as  a  result  of  a  more  just  division 
of  the  profits  of  industry. 


WHAT  HAPPENED  TO  EUROPE 

That  view  has  certainly  been  upheld  by  the  re- 
sults of  the  Coal  Inquiry  in  England.  In  the  light 
of  the  facts  brought  out  by  that  inquiry,  there  could 
have  been  no  other  decision  than  that  labor  was  en- 
titled to  shorter  hours  and  much  higher  pay.  Of 
course,  the  condition  is  not  parallel  in  other  lines  of 
industry,  and  there  is  probably  grave  danger  in  ap- 
plying that  view  to  those  industries  whose  life  is  de- 
pendent upon  ability  to  compete  in  neutral  markets. 
Of  course,  a  higher  price  for  coal  will  affect  Eng- 
land's ability  to  compete  in  all  international  lines  of 
industry. 

There  is  a  tendency  for  labor  to  lose  its  faith  in 
the  efficacy  of  higher  wages.  Debased  currency  and 
deficient  supplies  have  so  steadily  advanced  the  cost 
of  living  that  higher  wages  have  frequently  brought 
no 'additional  comforts  of  life.  It  is  in  this  fact  that 
there  is  the  most  dangerous  ground  for  propagating 
dissatisfaction  with  the  entire  capitalistic  order  of 
society.  Everywhere  in  Europe  there  is  a  substan- 
tial minority  in  the  labor  world  ready  for  a  revolu- 
tion to  establish  a  Communistic  State.  I  have  dis- 
cussed this  phase  in  the  chapter  on  "  The  Power  of 
Minorities." 

Labor's  position  in  Europe  is  going  to  be  tre- 
mendously strengthened  by  the  loss  of  man-power  re- 
sulting from  the  casualties  of  war.  These  figures 


123 

reach  an  enormous  total  and  have  an  immediate  ef- 
fect. But  of  still  greater  portent  is  the  loss  of  popu- 
lation resulting  from  the  decreased  normal  birth  rate. 
A  sound  authority  estimates  that  the  belligerent 
countries  are  poorer  by  twelve  million  lives  because  of 
the  separation  of  husbands  and  wives  during  the  war. 

A  profound  effect  upon  the  character  of  the  in- 
dustrial skill  of  European  labor  has  been  produced 
by  the  war.  The  whole  normal  course  of  apprentice- 
ship and  training  of  young  men  has  been  interfered 
with.  Not  only  have  apprentices  been  withdrawn 
from  shops  to  the  colors,  but  the  absorption  of  in- 
dustry for  five  years  in  vast  scale  production  where 
the  amount  of  repetitive  work  in  which  no  skill  is 
required,  except  for  a  single  operation,  has  been  very 
large,  has  made  these  years  in  a  measure,  blank  in 
the  training  they  have  given  in  all-round  craftsman- 
ship to  the  rising  generation. 

As  against  this  loss  of  skill  there  have  been  sub- 
stantial gains  from  the  labor  of  women  in  industry. 
Women  have  been  found  in  many  cases  surprisingly 
efficient.  There  is  also  the  permanent  gain  so  far  as 
efficient  and  cheap  production  goes  from  the  intro- 
duction of  automatic  machines  whose  use  the  con- 
servative employer  had  been  slow  to  rightly  appraise, 
and  whose  introduction  was  steadily  opposed  before 
the  war  by  labor. 


124      WHAT  HAPPENED  TO  EUROPE 

I  suppose  the  most  significant  thing  in  the  whole 
European  labor  situation  is  the  quickened  conscious- 
ness in  the  minds  of  labor,  which  has  come  from  the 
whole  war  experience,  of  labor's  own  power,  and  the 
keener  comprehension  of  labor's  claims  in  a  democ- 
racy to  a  greater  equality  of  opportunity  and  re- 
ward. The  attitude  of  social  classes  throughout  Eu- 
rope has  been  profoundly  affected  by  the  democracy 
of  the  war  experience.  This  experience  has  broken 
down  many  old  class  barriers.  That  fact  is  star- 
tlingly  exemplified,  not  alone  in  the  new  demands  of 
labor,  but  in  universally  a  more  liberal  attitude  by 
employers.  Nowhere  in  Europe  is  there  any  longer 
any  substantial  resistance  on  the  part  of  employers 
to  an  eight  hour  day. 

Perhaps  there  is  no  single  mental  effect  of  the 
war  that  is  more  significant  than  the  changed  atti- 
tude of  European  employers  to  the  whole  labor  ques- 
tion. There  is  a  disposition  to  examine  the  very 
fundamentals  of  labor's  dissatisfaction  and  to  accept 
as  not  only  necessary,  but  probably  as  desirable,  a 
quite  new  status  of  the  workers,  particularly  in  rela- 
tion to  giving  them  a  really  effective  voice  in  the 
management  of  industry. 

This  does  not  mean  any  tendency  toward  anarchy 
in  industry.  A  larger  voice  in  industrial  manage- 
ment on  the  part  of  labor  is  not  translated  either 


"  COMFORT  AND  LIBERTY  "          125 

by  labor  or  employers  to  mean  a  voice  that  extends 
to  commercial  policy.  More  than  anything  else  it 
seems  to  me  to  mean  that  labor  shall  be  taken  into  the 
confidence  of  employers,  shall  be  informed  in  regard 
to  aims,  advised  with  in  respect  to  difficulties,  listened 
to  when  it  wishes  to  make  suggestions  in  regard  to 
shop  practice,  and  conferred  with  about  shop  condi- 
tions, and  particularly  about  shop  foremen.  In  a 
word,  labor  wants  to  be  led  instead  of  driven,  and  it 
wants  its  leaders  so  to  take  it  into  their  confidence 
that  labor  will  have  some  intelligent  view  of  the  task 
to  be  accomplished. 

All  this  may  sound  very  revolutionary  to  an  em- 
ployer who  has  counted  labor  costs  as  he  has  counted 
the  cost  of  copper  or  steel  or  cotton.  There  has  been 
a  great  awakening  in  Europe,  however,  to  the  differ- 
ence between  buying  the  raw  material  commodities 
and  the  buying  of  the  labor  element  that,  combined 
with  them,  makes  the  finished  product. 

Employers  have  begun  to  distrust  their  old  point 
of  view  and  to  take  a  new  and  a  far  more  human  atti- 
tude toward  the  whole  labor  problem.  There  is  an 
underlying  optimism  in  their  minds  that  has  led  many 
of  them  to  believe  that  perhaps  after  all  these  de- 
mands of  labor  were  not  merely  concessions  to  be 
wrung  from  capital  and  to  be  resisted  at  every  step, 
but  rather  that  it  is  possible  that  in  the  direction  of 


126      WHAT  HAPPENED  TO  EUROPE 

these  demands  lies  the  basis  of  a  new  understanding 
and  a  true  cooperation  between  capital  and  labor. 
The  employers'  attitude  in  this  respect  is  undoubtedly 
quickened  by  the  fear  that  if  labor  now  encountered 
a  Tory  obstinacy  on  the  part  of  employers,  there 
would  be  danger  that  their  part  of  the  world  at  least 
would  be  launched  on  a  vast  and  frightfully  danger- 
ous experiment  in  one  type  or  another  of  "  national- 
ism "  or  "  communism,"  the  generic  term  for  which  in 
everybody's  mind  is  now  "  Bolshevism." 

I  would  not  iiave  any  one  infer  that  I  believe  there 
is  a  millennium  at  hand  in  the  European  industrial 
world,  nor  would  I  wish  it  thought  that  I  have  a  con- 
ception of  European  or  particularly  of  British  labor 
that  is  Utopian.  There  is  ignorance  of  economic 
law,  there  is  class  selfishness,  there  is  stupid  adher- 
ence to  unsound  tradition  that  any  plan  for  perma- 
nently composing  the  differences  between  capital  and 
labor  will  have  to  overcome.  Opposed  to  that, 
however,  is  one  of  the  most  inspiriting  things  that  I 
encountered  in  Europe.  That  was  the  quality  of 
mind  in  certain  Englishmen  who  have  come  up  from 
the  ranks  of  labor.  Some  of  them  are  cabinet  min- 
isters, some  of  them  now  hold  noble  titles,  some  of 
them  still  are  rendering  services  to  their  fellows  as 
union  officials. 

There  is  truly  a  new  intellectual  aristocracy  grow- 


"  COMFORT  AND  LIBERTY  "          127 

ing  up  in  England,  fed  from  the  ranks  of  labor 
and  having  an  outlook,  an  understanding,  a  sympa- 
thy, and  withal  a  grip  on  the  economic  verities  that 
marks  the  most  promising  and  significant  develop- 
ment. 

In  the  great  war  America  achieved  the  freeing  of 
herself  from  the  incubus  of  militarism  at  the  cost  of 
a  sacrifice  which,  compared  with  the  sacrifice  made 
by  the  nations  associated  with  her,  has  been  small 
indeed.  She  faced  a  world  situation  in  which  mili- 
tary power  seemed  likely  to  be  set  up  as  the  pre- 
dominant force.  With  all  the  rest  of  the  world  she 
is  now  free,  it  is  to  be  hoped,  from  that  terrible  ca- 
tastrophe; and  she  has  fortunately  secured  freedom 
at  no  crushing  cost. 

I  believe  that  it  lies  within  the  power  of  American 
employers  and  of  American  capitalists  similarly  to 
make  a  short  cut  without  great  sacrifice  to  a  future 
of  industrial  peace,  and  to  escape  what  might  be  a 
conflict  that  would  be  as  dangerous  to  her  national 
life  and  prosperity  as  was  the  conflict  we  have  so 
happily  passed  through.  That  short  cut  may  be 
reached  if  these  interests  will  now  with  one  accord 
come  to  the  point  of  view  that  has  already  been 
reached  by  European  employers  and  capital.  That 
will  require  a  true  vision,  a  development  of  human 
sympathy,  a  grasp  of  economic  principles,  a  conces- 


128      WHAT  HAPPENED  TO  EUROPE 

sion  in  time- rooted  prejudices  and  a  quickened  under- 
standing of  the  aspirations  and  the  point  of  view  of 
labor.  Is  it  too  much  to  hope  for? 

I  am  convinced  that  it  is  along  these  lines  that  in- 
dustrial peace  lies.  I  have  come  to  feel  profoundly 
that  a  liberalizing  of  the  views  of  employers  and 
capitalists  in  respect  to  labor  will  be  followed  by  a 
gain  to  both  sides,  the  value  of  which  could  hardly 
be  measured.  In  that  direction  lies  the  hope  that 
America  may  make  the  same  sort  of  short  cut  to  in- 
dustrial peace  that  she  made  in  freeing  herself  from 
ft  life  of  apprehension  of  military  domination.  It 
seems  to  me  clear  as  crystal  that  along  this  road  there 
lies  not  only  great  moral  satisfaction,  but  side  by 
side  with  that  lies  the  greatest  material  prosperity. 


CHAPTER  XII 
AN  EMPLOYEE'S  VISION 

THE  changed  and  liberalized  attitude  of  employ- 
ers in  England  struck  me  as  most  significant.  Per- 
haps I  could  in  no  better  way  illustrate  that  than 
by  reproducing,  as  well  as  I  can  remember,  an  inter- 
view I  had  with  an  employer  of  first  importance. 
This  gentleman  has  had  a  wide  experience  through- 
out his  life  with  large  bodies  of  work  people.  His 
view  of  the  labor  question  seemed  to  me  extremely 
interesting.  This  is  what  he  had  to  say : 

"  No  one  foresaw  what  the  war  was  going  to  mean. 
Least  of  all,  perhaps,  did  any  one  foresee  that  it  was 
going  to  mean  a  social  revolution,  a  revolution  in 
the  way  men's  minds  work  and  a  change  in  the  point 
of  view  from  which  they  regarded  relationships  with 
one  another.  We  are  just  becoming  aware  that  we 
are  going  to  emerge  from  the  war  with  an  industrial 
revolution  already  accomplished. 

"  I  would  sum  up  my  own  view  in  regard  to  so- 
ciety's relation  to  labor  in  about  this  way:  There 
are  five  great  principles  that  we  must  accept.  The 

first  of  these  is  a  minimum  wage.     When  we  see  that 

129 


130      WHAT  HAPPENED  TO  EUROPE 

labor  is  not  a  commodity,  that  it  is  no  longer  to  be 
treated  as  a  commodity,  we  will  come  to  see  the  jus- 
tice in  national  laws  formulating  a  reasonable  mini- 
mum wage.  This  means  a  wage  to  all  normal  men 
that  will  permit  them  to  marry,  to  bring  up  a  family, 
and  have  left  a  reasonable  margin  for  unusual  emer- 
gencies. I  believe  there  should  be  established  trade 
boards  in  every  industry.  I  think  that  that  may  rea- 
sonably be  done  in  the  next  five  years.  To  work  it 
out  in  detail  must  be  a  matter  of  experiment  and  ex- 
perience, but  within  that  time,  although  we'  may  not 
have  it  worked  out  in  figures,  we  should  have  laid  the 
principles  and  be  on  the  road  where  we  can  logically 
apply  those  principles  to  all  the  varying  conditions 
of  industrial  life  and  eventually  arrive  at  the  definite 
minimum  wage  that  every  normal  man,  ready  -in  his 
capacity  to  do  his  part,  may  count  upon. 

"  After  we  have  reached  an  understanding  as  to 
what  the  basic  wage  must  be  we  must  regard  that 
really  as  a  minimum  and  not  as  the  general  wage  scale. 
I  think  we  can  reasonably  leave  to  the  haggling  of  the 
market  what  will  be  the  reward  for  exceptional  skill 
or  exceptional  industry.  It  would  be  a  profound 
mistake  to  aim  to  fix  a  maximum  wage.  That  would 
discourage  all  attempt  at  improvement.  There 
should  be  left  freedom  for  employers  to  pay  more 
than  this  basic  wage  in  order  to  secure  men  with  spe- 


AN  EMPLOYER'S  VISION  131 

cial  skill,  energy,  or  industry.  I  am  engaged  in  a 
food  products  business.  In  my  works  the  present 
minimum  for  men  is  fifty-five  shillings  per  week. 

"  It  may  be  argued  that  it  will  be  found  that  there 
are  industries  which,  on  account  of  the  foreign  com- 
petition or  other  reasons,  will  find  it  impossible  to  pay 
the  minimum  wage.  If,  after  a  fair  trial,  that  is 
found  to  be  so,  the  answer  should  be,  '  scrap  the 
industry.'  If  an  industry  is  found  to  be  on  such 
an  economic  basis  that  it  cannot  exist  and  pay  a 
wage  scale  equal  to  what  is  found  to  be  the  basic 
necessity  for  the  standard  of  life  as  I  have  outlined 
it  then  the  country  is  better  off  if  that  industry  goes 
out  of  existence. 

"  The  second  important  point  is  that  of  hours. 
My  own  belief  is  that  forty-eight  hours  a  week  will 
probably  be  found  to  be  right.  At  the  present  time 
in  the  industry  in  which  I  am  interested  we  have  a 
forty-four  hour  week.  We  -have  left  it  to  the  work- 
men to  decide  how  the  hours  shall  be  divided,  and  they 
have  decided  to  work  nine  hours  a  day  for  four  days 
and  eight  hours  for  one  day,  and  to  have  Saturday  en- 
tirely free.  I  think  that  decision  is  wrong.  We 
lose  the  advantage  of  the  short  day's  work  and  all 
the  better  production  that  would  probably  follow 
the  short  day's  work.  I  think  the  arrangement 
should  be  five  days  of  eight  hours,  with  four  hours 


132      WHAT  HAPPENED  TO  EUROPE 

on  Saturday.  However,  our  employees  felt  other- 
wise and  we  are  making  the  experiment,  although  we 
do  not  agree  with  the  plan  of  letting  them  do  the  full 
week's  work  during  five  days. 

"  Third,  labor  should  be  given  security  against  un- 
employment. That  should  be  accomplished,  not  as 
we  are  doing  in  England  now,  but  by  means  of  an 
insurance  fund  to  which  the  workmen,  the  employers 
and  the  State  should  all  contribute.  Conditions  in 
England  in  one  respect  are  quite  different  from  condi- 
tions in  the  United  States.  Here  we  have  nominally 
no  large  turn-over  of  labor.  In  our  works,  for  ex- 
ample, we  employ  three  thousand  girls.  Our  average 
loss  of  these  employees  is  under  three  hundred  a  year. 
Our  experience  is  that  our  employees  come  to  us  when 
they  first  begin  to  work  and  the  women  remain  with 
us  until  they  marry. 

"  Conditions  in  regard  to  unemployment  vary  with 
different  industries,  and  may  vary  widely  in  the 
same  industry  at  different  times.  That  leads  me 
to  believe  that  while  a  proper  insurance  fund  should 
mainly  be  created  by  the  employees  and  the  employ- 
ers in  each  industry,  there  should  be  cooperation  be- 
tween the  industry  and  the  State  so  as  to  spread  the 
liability  and  not  make  each  industry  wholly  respon- 
sible for  all  of  the  unemployment  in  that  industry. 
The  present  unemployment  payments  are  not  large 


AN  EMPLOYER'S  VISION  133 

enough,  but  they  are  larger  than  can  be  borne  per- 
haps if  there  is  not  contribution  to  the  fund  by  both 
the  workers  and  the  employers. 

"  We  are  all  greatly  concerned  at  the  present  time 
because  of  the  number  of  unemployed,  but  that  num- 
ber is  after  all  not  remarkably  large.  What  has 
happened  is  that  the  conscience  of  the  nation  has 
been  awakened  to  its  responsibility  to  the  individual 
in  a  period  of  enforced  unemployment,  and  in  the 
light  of  that  consciousness  of  responsibility  the  fig- 
ures for  the  first  time  stand  out  clearly  in  our  minds 
in  regard  to  the  number  of  unemployed.  We  have 
nearly  always  had  unemployment  but  we  have  not 
been  aware  of  its  extent,  not  feeling  a  national  re- 
sponsibility toward  those  who  are  out  of  work.  For 
a  number  of  years  prior  to  the  war  there  was  an 
average  unemployment  of  five  per  cent,  of  the  work- 
ing population,  and  the  greater  part  of  this  unem- 
ployment was  owing  to  exigencies  over  which  the 
employees  had  no  control.  A  state  of  unemployment 
where  no  provision  is  made  for  the  unemployed  re- 
acts on  the  whole  situation  in  a  way  we  have  not  be- 
fore clearly  understood.  With  five  per  cent,  of  the 
working  population  unemployed,  and  no  means  pro- 
vided for  their  support,  all  industry  feels  the  lack  of 
their  consumptive  demand.  If  there  was  a  sound 
general  unemployment  insurance  the  unemployed  per- 


134.      WHAT  HAPPENED  TO  EUROPE 

centage  of  the  community  would  still  be  in  a  position 
to  exercise  an  effective  demand  for  the  products  of 
industry,  and  it  is  apparent,  therefore,  that  an  ade- 
quate unemployment  insurance  scheme  would  reduce 
the  actual  unemployment.  The  best  study  which  has 
been  made  of  this  whole  subject  will  be  found  in  Sir 
William  Beveridge's  book  on  *  Unemployment.'  If 
the  workers,  the  employers,  and  the  State  each  con- 
tribute six  pence  a  week  for  each  worker  it  is  calcu- 
lated that  this  would  provide  at  least  twenty-five 
shillings  a  week  for  unemployment  insurance  for 
everybody. 

"  I  believe  some  most  important  results  will  flow 
from  a  sound  unemployment  insurance  scheme. 
When  we  discover  that  properly  looking  after  the 
unemployed  is  costing  us  a  lot  of  money  we  will  do 
a  great  deal  to  regulate  unemployment. 

"  Fourth,  a  larger  control  of  industry  by  the  work- 
ers. This  should  be  the  next  step.  The  workers  of 
this  country  have  made  up  their  minds  that  they  do 
not  intend  to  continue  as  wage  slaves.  They  want 
a  voice  in  the  administration  of  the  industrial  part 
of  the  business  in  which  they  are  engaged,  and 
they  want  that  not  as  an  act  of  grace,  but  as  a 
right. 

"  I  have  been  very  anxious  to  know  just  what  was  in 
the  minds  of  our  workers  in  regard  to  what  they  want 


AN  EMPLOYER'S  VISION  135 

in  their  relation  to  industry.  You  cannot  find  that 
out  merely  by  sitting  on  the  opposite  side  of  a  table 
during  an  acute  stage  of  a  labor  controversy.  I 
have  therefore  taken  a  great  deal  of  pains  to  get  into 
touch,  not  only  with  the  men  in  my  own  industry,  but 
with  employees  generally.  I  have  had  representative 
workmen  spend  week-ends  with  me  and  talk  the  sub- 
ject over  as  man  to  man,  and  I  have  had  meetings  of 
representative  workmen  drawn  from  various  indus- 
tries to  discuss  the  subject.  These  meetings  were 
not  so  brief  and  formal  that  we  failed  to  get  at  the 
heart  of  the  question,  but  were  conferences  where  we 
got  into  such  relations  with  the  men  that  we  were 
enabled  to  bring  out  what  was  really  in  their  minds. 
I  would  take  a  country  hotel  and  bring  together  for 
a  week-end  conference  large  groups  of  representa- 
tive workmen  and  the  result  has  been  most  enlighten- 
ing. 

"  Fifth,  the  final  step  is  to  give  labor  a  real  interest 
in  the  profits  of  the  business,  and  this  is  the  lowest 
price  at  which  the  capitalistic  regime  can  buy  itself 
off  from  the  danger  of  revolution.  There  is  a  great 
deal  of  preaching  to  the  effect  that  the  interests  of 
labor  and  capital  are  identical.  That  is  all  bosh. 
The  interests  of  labor  and  capital  are  not  identical. 
It  is  labor's  aim,  and  its  proper  aim,  to  obtain  in 
the  division  between  capital  and  labor  all  that  it 


136      WHAT  HAPPENED  TO  EUROPE 

can,  just  as  it  is  the  aim  of  capital  in  its  division 
of  the  results  of  capital  and  labor  to  obtain  all  it 
can.  Up  to  the  point  of  an  industry  going  to  smash 
the  interests  of  labor  are  opposed  to  the  interests  of 
capital.  How  to  make  this  division  of  the  results  of 
industry  between  labor  and  capital  is  the  mbst  dif- 
ficult of  all  problems. 

"  In  my  own  opinion  we  should  look  at  it  in  this 
way:  There  should  first  be  two  definite  charges 
against  the  net  profits  of  industry,  (1)  a  living  wage 
to  labor,  and  (2)  a  minimum  return  to  capital.  Then 
after  labor  has  received  a  basic  wage  and  capital  has 
received  a  minimum  return,  all  that  is  earned  should 
be  divided  between  capital  and  labor,  and  in  my  opin- 
ion it  should  be  divided  equally. 

"  I  am  so  certain  that  we  must  reach  some  working 
plan  along  these  lines,  if  the  present  system  of  so- 
ciety is  to  be  saved,  that  I  am  having  the  subject 
carefully  studied.  One  of  the  difficulties  in  this  whole 
field  of  an  adjustment  between  capital  and  labor  is 
that  the  owners  and  managers  of  industry  are  so  en- 
grossed with  their  daily  business  problems  that  they 
have  no  time  for  a  really  scientific  study  of  the  sub- 
ject. Realizing  that,  I  have  employed  one  of  the 
ablest  men  I  know,  a  lawyer  of  broad  experience  and 
keen  intelligence,  and  he  is  now  giving  his  whole  time 


AN  EMPLOYER'S  VISION  137 

to  a  study  of  this  particular  problem  in  our  own 
work. 

"  I  am  thoroughly  convinced  that  if  we  are  to  save 
the  present  order  of  society  we  must  make  such  thor- 
ough-going concessions  as  I  have  here  indicated.  I 
have  had  a  talk  recently  with  Sir  Robert  Home  and 
I  said  to  him,  *  Are  you  out  for  mustard  plasters  ? 
If  you  are  out  for  mustard  plasters  only,  if  you  are 
looking  for  mere  palliatives,  you  are  going  to  fail. 
My  recommendation  to  you  is  to  appoint  the  strong- 
est royal  commission  that  can  be  brought  together 
and  have  them  consider  these  last  two  points,  that  is, 
the  part  that  workers  should  play  in  the  control  of 
industry  and  the  methods  by  which  labor  can  be  given 
a  real  interest  in  the  profits  of  the  business.  I  would 
have  that  commission  composed  of  the  strongest  pos- 
sible representatives  of  both  capital  and  labor  and 
I  would  make  the  decision  of  the  commission  law.' 

"  In  working  out  a  scheme  for  giving  the  conces- 
sions I  have  indicated  to  labor  we  must  be  careful  to 
guard  the  freedom  of  labor.  It  is  a  great  asset  to 
the  laborer  that  he  can  move  freely  from  one  indus- 
try to  another  and  from  one  employment  to  another. 

"  I  found  that  their  complaint  lay  not  so  much 
against  the  managers  of  industry  as  against  the 
foremen.  They  felt  that  foremen  frequently  were 


138      WHAT  HAPPENED  TO  EUROPE 

naggers,  that  these  foremen  were  badly  selected,  that 
they  were  drawn  from  men  who  did  not  know  how  to 
lead,  and  instead  of  leading  they  tried  to  get  results 
by  driving.  I  have  been  so  impressed  with  the  jus- 
tice of  this  view  that  in  the  industry  in  which  I  am 
interested  we  never  appoint  a  foreman  without  first 
submitting  his  name  to  the  Works  Council ;  that  is, 
to  the  representatives  of  the  workers.  We  submit 
the  name  of  the  proposed  foreman  and  we  hear  what 
the  representatives  of  the  men  have  to  say  and  listen 
to  their  suggestions.  The  final  selection  must  al- 
ways lie  with  us,  but  we  pay  a  great  deal  of  attention 
to  the  voice  of  the  workmen  themselves. 

"  What  the  workmen  want  is  something  that  goes 
very  much  further  than  the  *  Whitley  Committees.' 
They  want  a  real  control  of  the  technical  conditions 
of  the  industry  and  they  want  that  control  as  equals 
with  the  owners. 

"  A  friend'  of  mine,  who  is  deeply  interested  in  these 
social  questions  and  who  knows  well  my  inclination 
and  desire  to  meet  fairly  the  claims  of  labor,  recently 
visited  my  plant.  After  a  pretty  thorough  study 
of  conditions  there  my  friend  expressed  surprise  at 
the  amount  of  unrest  among  the  workers  in  the  plant. 
My  friend  undertook  to  make  some  analysis  of  the 
cause  of  this  unrest  and  finally  summed  the  trouble 
up  all  in  one  word  — *  Overseers.' 


AN  EMPLOYER'S  VISION  139 

"  No  matter  how  liberal  were  the  views  of  the  real 
owners  of  the  industry,  no  matter  how  desirous  they 
were  of  creating  conditions  which  were  satisfactory 
to  all  labor,  we  found  we  were  being  blocked  by  the 
hardness  of  our  foremen.  So  we  set  about  trying  to 
correct  that  situation.  We  started  courses  of  lec- 
tures for  our  foremen.  We  arranged  a  week-end 
school  for  one  hundred  and  twenty  foremen  and  gave 
them  lectures  on  many  phases  of  the  situation. 
Some  of  them  told  us  they  had  learned  more  of  the 
art  of  management  at  one  of  these  meetings  than 
they  had  in  twenty  years  of  shop  experience.  We 
got  representatives  of  workers  from  other  industries, 
drawing  them  from  other  industries  so  that  they 
would  feel  free  to  speak  frankly,  and  we  had  them 
give  talks  on  oversight  from  the  workers'  point  of 
view.  The  result  of  all  that  has  been  a  distinct  im- 
provement of  the  attitude  of  our  foremen  and  this 
is  followed  by  improvement  in  the  attitude  of  our 
workers.  But  we  are  keeping  the  management,  we 
believe,  along  practical  lines.  We  are  not  making 
the  mistake  of  giving  too  great  weight  to  the  wishes 
of  the  workers.  There  can  be  no  anarchy  in  indus- 
try. Our  workers  may  well  be  mistaken  in  their 
own  point  of  view.  But  we  find  this,  that  if  our  men 
feel  that  they  have  a  voice  in  the  industrial  conditions 
with  which  they  are  concerned  they  will  themselves 


140      WHAT  HAPPENED  TO  EUROPE 

evolve  a  system  of  regulations  that  is  more  effective 
than  any  that  could  possibly  be  imposed  upon  them. 
Men  will  accept  conditions  of  control  from  Democ- 
racy that  they  would  not  tolerate  from  Autocracy. 

"  As  matters  stand  to-day  the  owners  of  industry 
do  not  dare  to  be  frank  with  their  men  in  regard  to 
the  net  results  they  are  obtaining.  There  are  times 
when  a  frank  statement  of  the  financial  situation  of  an 
industry,  if  it  were  believed  by  the  workers,  would 
result  in  their  cooperation  either  in  the  way  of  re- 
duced wages  or  increased  industry.  Take,  for  ex- 
ample, the  jute  industry  at  Dundee.  As  conditions 
were  prior  to  the  war,  jute  could  be  produced  at  six 
pounds  per  ton  dearer  than  the  cost  of  production  in 
India.  To-day  it  costs  eighteen  pounds  per  ton 
more  to  turn  out  the  product  in  Dundee  than  in 
India,  and  the  result  is  that  forty-five  thousand  men 
have  gone  into  unemployment  in  this  industry  alone. 
If  they  clearly  understood  the  financial  position  of 
the  industry  their  cooperation  could  be  had  to  save 
it.  The  trouble  is  that  men  have  repeatedly  been 
told  when  they  struck  for  higher  wages  that  if  such 
an  increase  as  they  demanded  were  conceded  the  in- 
dustry would  have  to  close  its  doors.  And  then, 
through  the  strike  weapon,  they  have  forced  the  in- 
crease, and  the  industry  went  on  as  usual.  It  is  not 
unnatural,  therefore,  that  they  will  always  answer 


AN  EMPLOYER'S  VISION  141 

any  statement  in  regard  to  inability  of  an  industry 
to  pay  an  increased  wage  by  the  statement  that  "  you 
have  said  that  before,  but  we  got  the  raise  and  you 
went  on  as  usual." 

"  One  claim  that  is  frequently  made  is  that  if  the 
workers  force  a  better  division  the  result  will  be 
that  capital  will  leave  the  country.  Many  people 
thought  that  if  such  a  plan  as  I  have  in  mind  for  the 
division  of  profits  were  to  be  enforced  capital  would 
emigrate  and  leave  industry  prostrate.  I  do  not 
believe  that  is  so.  Let  us  take,  for  example,  an  in- 
dustry that  is  now  earning  fourteen  per  cent.  Sup- 
pose an  arrangement  were  made  with  the  workers  so 
there  was  paid  to  the  capital  invested  six  per  cent., 
and  the  remainder  divided  between  capital  and  la- 
bor. Under  that  arrangement  capital  would  receive 
ten  per  cent.,  but  I  believe  it  would  receive  ten  per 
cent,  only  for  a  short  time,  that  eventually  it  would 
be  found  that  it  was  earning,  not  the  fourteen  per 
cent,  it  had  before,  but  twenty  per  cent.,  which  would 
be  its  share  of  a  division  with  satisfied  workers. 

"  To-day  the  brains  of  the  country  are  being 
wasted.  In  a  factory  employing,  say  seven  thousand 
people,  the  work  is  directed  by  the  brains  of  perhaps 
not  over  a  hundred.  If  such  an  adjustment  could  be 
made  that  the  brains  of  the  whole  seven  thousand  were 
engaged  with  the  problems  of  that  industry,  if  all  the 


142      WHAT  HAPPENED  TO  EUROPE 

workers  had  an  intelligent  grasp  of  at  least  some 
part  of  those  problems,  and  all  cheerfully  applied 
their  energy  and  brains  to  the  welfare  of  the  indus- 
try because  they  were  satisfied  with  their  working 
conditions,  and  felt  that  they  occupied  a  just  rela- 
tionship to  the  results  obtained  by  the  enterprise, 
then  the  profits,  both  for  capital  and  labor,  would 
be  far  beyond  anything  that  the  present  system  can 
produce.  The  country  that  first  arranges  its  in- 
dustrial life  so  as  to  meet  these  conditions,  the  coun- 
try that  first  puts  the  brains  as  well  as  the  backs  of 
its  industrial  population  into  the  work  that  is  being 
done,  will  forge  so  far  ahead  of  other  nations  that 
men  will  wonder  that  society  could  ever  have  endured 
the  present  system. 

"  There  cannot  be  full  production  in  industry  so 
long  as  there  is  dissatisfaction  on  the  part  of  the 
workers.  The  water  flows  deeper  than  anything  that 
is  touched  by  these  *  Whitley  Committees.'  Tap 
the  brains  of  the  whole  nation.  Get  men  to  work 
with  the  industry  which  goes  with  a  satisfaction  with 
working  conditions,  and  we  will  have  a  revolution  in 
industry  indeed,  but  one  which  will  bring  such  bene- 
ficial results  as  have  never  before  been  obtained." 


CHAPTER  XIII 

THE    POWER    OF    MINORITIES 

WHOEVER  has  hope  for  humanity,  whoever  be- 
lieves in  democracy,  is  convinced  that  the  great  mass 
of  the  people  is  right-minded,  well  intentioned  and, 
despite  local  aberrations,  that  the  voice  of  the  great 
majority  is  a  wise  voice.  One  comes  to  a  comfort- 
able optimism  that  things  will  work  out  well  in  the 
end  if  the  majority  rules. 

One  of  the  most  startling  impressions  which  I  have 
received  in  Europe  is  that  the  majority  do  not  rule 
and  that  sometimes  minorities,  apparently  almost  in- 
consequentially small,  may  grasp  power  and  wield 
it  in  amazing  fashion.  If  this  is  so  we  cannot  rest 
comfortably  in  the  assurance  that  majorities  are 
right-minded  and  that  rightmindedness  will  control 
destinies  where  majorities  have  the  ostensible  politi- 
cal power. 

Perhaps  the  most  awful  illustration  of  all  time  of 
the  terrible  power  of  a  minority  is  to  be  found  in 
the  starting  of  the  Great  War  itself.  The  power  of 

that  numerically  insignificant  party  of  Prussian  mili- 

143 


144      WHAT  HAPPENED  TO  EUROPE 

tarists  to  throw  a  whole  world  into  a  cataclysm  has 
no  parallel.  But  here  it  may  be  stated  there  was  no 
free  play  of  the  voice  of  democracy  and  that  a  great 
people  had  no  volition,  but  had  to  follow  where  they 
were  led. 

Let  us  take  another  illustration.  Perhaps  100,- 
000,000  people  of  the  175,000,000  that  once  consti- 
tuted Russia  have  passed  under  the  sway  of  a  Bolshe- 
vik regime,  although  the  true  adherents  to  that  po- 
litical theory  probably  numbered  less  than  5  per  cent, 
of  the  population  involved.  The  most  centralized 
and  autocratic  government  in  modern  times  has 
sprung  up  in  Russia,  although  95  per  cent,  of  the 
people  involved  did  not  adhere  to  the  political 
theories  and  would  repudiate  the  authority  if  they 
could. 

Perhaps  it  would  be  as  appropriate  a  place  as  any 
to  give  a  picture  of  the  internal  Bolshevik  Russia 
on  the  first  of  April,  1919.  It  is  a  second-hand  pic- 
ture to  be  sure,  but  it  is  only  second  hand.  It  is 
made  up  from  facts  related  to  me  by  one  Russian 
and  two  Americans  who  were  in  Petrograd  and  Mos- 
cow for  the  purpose  of  observation,  who  had  con- 
ferences with  Lenine  and  Trotzky,  and  who  must  at 
least  have  grasped  the  superficial  aspects  of  life 
under  the  Bolshevik  regime. 

Here  are  the  essential  features  of  what  these  men 


THE  POWER  OF  MINORITIES        145 

told  me  they  saw.  They  entered  Russia  across  the 
Finnish  border,  taking  with  them  a  certain  amount 
of  food,  and  came  without  great  delay  to  Petrograd. 
Their  first  impression  was  a  City  of  Silence,  but  not 
a  city  of  destruction.  Petrograd  stands  outwardly 
very  much  as  it  did  before  the  revolution.  The  Win- 
ter Palace  is  scarred  here  and  there  from  shots,  and 
there  are  traces  of  the  effect  of  machine-guns  on 
the  walls  of  a  good  many  buildings.  There  has  been 
no  wholesale  destruction.  Every  shop  in  Petrograd 
is  closed  and  the  windows  shuttered.  Whatever  may 
be  bought  must  be  purchased  from  the  great  gov- 
ernment department  stores.  Their  stocks  are  mea- 
ger and  there  are  many  awkward  blanks.  Not  over 
one  million  people  are  left  in  the  city.  Literally, 
starvation  is  a  matter  of  daily  occurrence,  because 
of  the  impossibility  of  moving  food  into  the  city  over 
the  broken-down  transportation  system.  Out  of 
26,000  locomotives  that  none  too  adequately  served 
the  Bolshevik  region  prior  to  the  revolution,  less 
than  5,000  are  in  active  use.  Many  of  these  but 
limp  about  their  work.  There  is  not  a  ton  of  coal 
in  all  Bolshevik  Russia,  and  locomotives  must  be  fired 
with  wood.  Starvation  follows  the  breakdown  of 
transportation,  and  would  continue  no  matter  what 
sources  of  food  there  were  at  the  end  of  these  broken 
down  lines  of  railways. 


146      WHAT  HAPPENED  TO  EUROPE 

I  was  greatly  interested  to  learn  as  a  passing  piece 
of  information  that  the  great  art  treasures  of  the 
Hermitage  Museum  in  Petrograd  are  unharmed. 
My  friends  visited  the  museum,  saw  the  pictures  and 
bore  testimony  that  the  gallery  is  intact.  A  few  of 
the  most  valuable  pictures  had  been  sent  to  Moscow 
at  a  time  when  a  raid  was  feared  across  the  Finnish 
border,  but  at  the  time  of  this  visit  arrangements 
were  being  made  for  their  return. 

While  Petrograd  is  a  City  of  Silence,  Moscow  is 
a  center  of  chaotic  activity.  Being  the  seat  of  the 
most  autocratic  governmental  power  of  modern  days, 
the  home  of  a  government  that  has  centralized  its 
authority  to  the  highest  degree,  while  at  the  same 
time  that  authority  has  been  extended  to  the  minutest 
control  of  individual  lives,  the  whole  heartbeat  of 
Bolshevik  Russia  was  discernible  there.  Again 
there  was  evidence  that  the  tales  of  material  destruc- 
tion have  been  overdrawn.  The  stories  of  a  de- 
stroyed Kremlin  are  absolutely  untrue.  There  was 
no  evidence  of  damage  within  the  Kremlin  walls,  and 
the  only  evidence  of  damage  was  where  two  pinnacles 
on  the  Red  Gate  had  been  destroyed  and  workmen 
were  at  that  moment  engaged  in  replacing  them. 
Hunger  was  as  acute  in  Moscow  as  in  Petrograd. 
The  difficulties  of  transportation  were  the  same.  In 
spite  of  this  breakdown  in  transportation  my  friends 


THE  POWER  OF  MINORITIES        147 

made  the  trip  from  Petrograd  to  Moscow  in  thirteen 
hours,  which  is  only  two  hours  longer  than  the  old 
time  schedule. 

A  revolution  which  started  with  soldiers'  councils 
voting  on  whether  or  not  they  should  salute  their 
officers  and  what  measures  might  or  might  not  be 
used  by  the  doctors  in  controlling  the  spread  of 
typhus,  a  revolution  which  was  marked  in  the  begin- 
ning by  committees  of  workingmen  deposing  factory 
managers  and  "  democratizing  industry "  to  the 
limit  of  socialistic  imagination,  has  passed  to  quite 
another  phase.  There  are  no  more  Soldiers'  Coun- 
cils. Instead,  there  is  the  army  dominated  by  a  sys- 
tem of  discipline  that  would  make  a  Prussian  officer 
turn  green  with  envy.  Trotzky,  be  it  remembered, 
is  Lenine's  Secretary  of  War.  He  has  been  as  mad 
as  Nero  with  bloodthirst.  When  the  peasants  who 
wanted  a  definite  title  to  particular  parcels  of  land, 
quite  in  contravention  to  the  Bolshevik  theory  of 
communism,  revolted,  Trotzky  sent  an  overpowering 
military  force  against  one  village,  and  when  its  day's 
work  was  done  not  a  single  man,  woman  or  child  re- 
mained of  the  2500  that  were  there  at  sunrise.  This 
was  merely  an  example  of  terrorism  taken  perhaps 
from  the  book  of  the  Huns. 

On  another  similar  occasion,  the  regiments  were 
sent  against  a  revolting  village  and  retired  defeated. 


148      WHAT  HAPPENED  TO  EUROPE 

Trotzky's  method  of  discipline  in  this  case  was  to 
order  the  execution  of  every  officer  in  the  regiment 
and  every  tenth  man  in  the  ranks. 

Broadly  speaking,  however,  the  old  days  of  terror 
are  over.  A  stern  morality  has  taken  possession  of 
the  people.  In  their  distress  there  is  a  great  re- 
vival of  religious  feeling  and  in  their  desperate  con- 
dition they  are  turning  to  the  Church  for  comfort. 
Bolshevik  Russia  is  absolutely  dry. 

In  their  political  theory  of  communism  and  with 
the  Government's  complete  control  of  the  food  sup- 
plies there  is  but  one  method  of  averting  starvation, 
and  that  is  to  obtain  bread  cards.  But  a  bread  card 
it  is  true  does  not  always  mean  bread,  and  people 
sometimes  starve  with  bread  cards  in  their  hands. 
But  without  the  bread  card  food  may  not  be  had. 
Those  who  are  entitled  to  a  full  bread  card  are  the 
soldiers,  people  engaged  in  essential  work  who  accept 
the  Bolshevik  regime,  actors,  ballet  dancers,  and  all 
government  functionaries,  who  now  number  a  multi- 
tude. Others  although  accepting  the  Bolshevik  rule 
but  not  engaged  in  what  the  State  regards  as  neces- 
sary work,  receive  half  a  bread  card;  while  those 
who  do  not  work  or  will  not  accept  work  under  Bol- 
shevik conditions  may  receive  a  quarter  bread  card, 
which  if  it  could  be  converted  into  bread  would  still 
not  sustain  life.  Naturally,  the  community  is  Bol- 


THE  POWER  OF  MINORITIES        149 

shevik.  Those  who  do  not  accept  Bolshevism  accept 
death. 

The  minute  ordering  of  the  lives  of  people,  the  dead 
level  of  reward  and  the  meagerness  of  that  reward 
tends  to  make  Bolshevism  pall  when  viewed  as  a  po- 
litical panacea  by  its  victims. 

The  governmental  ordering  of  life,  the  total  loss  of 
personal  freedom,  is  building  up  a  new  party,  an  ex- 
treme left  of  Anarchism,  which  bitterly  resents  the 
extreme  developments  of  the  Government's  control 
of  the  individual  which  has  been  a  necessary  part  of 
communism.  And  so  it  has  come  that  Lenine  is  re- 
garded as  a  reactionary  by  this  extreme  left,  and 
there  is  growing  up  some  of  the  same  opposition  to 
his  democracy  that  undermined  the  autocracy  of  the 
Czar. 

The  personal  picture  of  Lenine,  with  which  I  have 
found  no  disagreement  in  speaking  with  a  number 
of  people  who  are  well  informed,  is  that  he  is  a  man 
of  most  extraordinary  ability,  and  with  some  truly 
fine  characteristics.  He  was  a  Russian  idealistic 
noble  and  came  to  be  a  man  of  only  one  idea.  He  be- 
lieved that  the  regime  of  capital  meant  slavery  and 
that  the  world  would  find  freedom  in  a  communistic 
state  of  society.  In  his  own  mind  every  motive  was 
fine,  every  act  moved  by  patriotic  sympathy  and  love 
for  the  people. 


150     WHAT  HAPPENED  TO  EUROPE 

In  Lenine's  War  Minister,  Trotzky,  there  seems 
to  be  utterly  different  material,  except  that,  like 
Lenine,  he  has  shown  vast  ability  to  organize.  He  has 
a  thirst  for  blood  such  as  had  mad  emperors  of  Rome. 
He  is  vindictive,  cynical,  cruel.  His  aim  is  to  im- 
pose Bolshevism  on  Europe  by  force  of  arms.  Both 
he  and  Lenine  agree  that  Europe  cannot  stand  di- 
vided between  a  communistic  and  a  capitalistic  state 
of  society.  One  side  or  the  other  must  fall. 
Trotzky  wants  to  bring  the  fall  of  capitalistic  so- 
ciety by  force  of  arms.  Lenine,  however,  believes 
that  each  nation  must  work  out  in  its  own  way  and 
by  its  own  revolution  its  change  from  a  capitalistic 
to  a  communistic  state.  He  wants  to  aid  by  propa- 
ganda, advice  and  financial  help  the  fomenting  of 
such  revolution,  but  he  would  be  prepared  to  de- 
mobilize the  Red  Army  if  the  armies  of  Kolchak  and 
Dinikine  and  those  of  his  enemies  on  his  northern 
and  western  fronts  would  disband. 

Already  the  Bolshevik  Government  has  had  to 
make  sharp  compromises  with  its  communistic  theo- 
ries. When  the  peasants,  following  the  revolution, 
got  in  their  possession  bits  of  land  their  views  of  com- 
munism quickly  changed.  They  demanded  a  guar- 
anty of  title  to  specific  land  holdings.  It  was  this 
demand  that  confronted  the  Bolshevik  Government, 
and  in  the  end  it  had  to  be  granted.  Bolshevik  com- 


THE  POWER  OF  MINORITIES        151 

munistic  government  to-day  is  giving  specific  land 
titles,  quite  against  its  communistic  theory,  to  the 
peasant  classes. 

In  another  particular  they  had  to  compromise 
with  the  theory  of  a  common  communistic  wage. 
The  "  democratization  of  industry  "  as  exemplified 
in  Russia  was  not  a  success.  It  seemed  to  be  essen- 
tial that  some  of  the  old  managers  of  industry  should 
be  brought  back,  but  they  were  not  inclined  to  come 
for  a  bread  ticket.  So  the  Government  is  paying 
some  very  handsome  salaries  (in  its  printed  paper 
money  it  is  true)  to  the  trained  industrial  managers. 
Thus  the  second  compromise  with  economic  princi- 
ple was  made.  Then  under  the  pressure  for  things 
from  the  outside,  negotiations  were  begun  to  alien- 
ate to  capitalistic  use  and  enterprise  tracts  of  royal 
land  in  order  to  get  capitalistic  credit  with  which  to 
pay  for  capitalistic  made  boots  and  other  needed 
imported  articles. 

Making  predictions  of  any  kind  is  dangerous  busi- 
ness. To  make  a  prediction  about  so  vast  a  chaos 
as  Russia  would  need  a  quite  foolishly  reckless 
prophet ;  and  still  without  making  a  prediction  I  am- 
going  to  make  a  guess.  The  Bolshevik  regime  is  a 
passing  phase.  It  will  be  succeeded  by  a  dictator, 
again  representing  an  effectively  powerful  small  mi- 
nority. The  period  of  dictatorship  will  be  followed 


152      WHAT  HAPPENED  TO  EUROPE 

by  a  constitutional  monarchy,  for  Russsia  with  its 
eighty-five  per  cent,  of  illiteracy  and  with  its  unsta- 
ble and  idealistic  national  character,  is  not  ready  for 
a  real  democracy.  And  then  sooner  or  later  there 
will  emerge  a  nation,  the  most  solvent  in  Europe, 
because  it  has  the  richest  natural  resources.  It  is 
a  nation  that  has  more  nearly  the  characteristics  of 
the  United  States  than  any  other  nation  in  the  world, 
and  it  may  yet  have  some  of  the  same  type  of  marvel- 
ous prosperity.  In  a  sense,  the  obligation  of  Russia, 
discredited  and  repudiated  as  it  is  to-day,  is  more 
valuable  than  the  obligation  of  some  countries  whose 
obligations  have  hardly  been  questioned,  because 
there  is  in  Russia  the  inherent  wealth  to  make  good 
its  obligations. 

But  all  this  is  but  guessing,  and  one  man's  guess 
is  worth  as  much  as  another's.  While  I  am  guess- 
ing, however,  I  will  make  another.  Russia  will  be 
dominated  and  exploited  by  Germany,  unless  the 
United  States  shows  unexpected  prescience,  courage 
and  a  disposition  to  take  a  financial  adventure.  Ger- 
many lies  adjacent  to  Russia.  I  am  told  there  are 
100,000  Germans  who  speak  the  Russian  language. 
The  intelligencia  of  Russia  has  well  nigh  disap- 
peared. At  least  50,000  have  been  assassinated,  and 
at  its  best  the  intelligencia  of  Russia  had  not  demon- 
strated great  powers  of  industrial  organization. 


THE  POWER  OF  MINORITIES        153 

The  imperial  spirit  of  conquest  has  not  been  killed 
in  Germany.  When  the  war  started  the  axis  of  Ger- 
man ambition  pointed  toward  Bagdad.  Now  it  will 
swing  around  toward  Moscow  and  the  rich  world  be- 
yond. There  will  be  an  escape  for  Germans  from 
the  slavery  of  indemnity  by  migration  to  Russia,  and 
an  almost  free  field  for  German  direction,  because 
there  will  be  few  Russians  left  with  capacity  to  di- 
rect. Indeed  in  some  quarters  it  is  believed  that 
there  has  been  German  planning  to  the  killing  off 
of  the  Russian  intelligencia,  which  was  but  another 
phase  of  that  devilish  cunning  which  destroyed  the 
machinery  of  Belgium  and  Northern  France  without 
military  necessity  but  only  that  commercial  compe- 
tition might  be  ended. 

If  America  cares  to  grapple  for  a  hold  on  this  vast 
chaotic  world  of  Russia  there  is  a  wonderful  oppor- 
tunity. The  American  mind  comprehends  Russian 
conditions.  If  our  people  would  go  there  in  force, 
going  with  a  desire  for  service  in  their  hearts,  rather 
than  with  narrow  views  of  immediate  exploitation  for 
profit,  we  could  give  Russia  a  future  and  save  her 
from  a  fate  that  would  make  a  wide  difference  in  the 
writing  of  the  next  hundred  years  of  the  world's  his- 
tory. If  we  keep  hands  off,  the  Russian  border  will 
offer  an  opportunity  for  escape  from  indemnity  servi- 
tude to  many  Germans,  and  the  genius  for  pitiless 


154      WHAT  HAPPENED  TO  EUROPE 

human  organization,  which  Germany  unquestionably 
has,  will  -find  -a  wonderful  field  to  display  itself  upon 
the  Russian  people. 

These  two  examples  of  Prussianism  and  Bolshevism 
arc  extreme  and  not  particularly  good  examples  of 
what  I  mean  by  the  "  power  of  minorities."  The 
point  that  I  wished  to  make  is  one  that  I  found  illus- 
trated in  many  European  countries,  of  what  an  active 
minority  can  do  pitted  against  a  phlegmatic  ma- 
jority, and  particularly  a  phlegmatic  majority  which 
has  little  solidarity. 

What  I  have  seen  leads  me  to  believe  that  it  might 
be  possible  in  any  country  to  change  the  course  of 
government,  to  overturn  the  form  of  government, 
indeed  even  to  impress  upon  the  people  a  new  form 
of  social  order,  while  the  great  majority  of  the  peo- 
ple had  no  desire  for  such  a  change  and  took  no 
active  part  in  bringing  it  about. 

I  believe  that  a  spread  of  Bolshevism  in  Europe 
can  come  either  through  contact  with  Bolshevik  coun- 
tries or  by  a  spontaneous  outbreak  of  Bolshevism  in 
a  community  where  industry  has  been  paralyzed  and 
idleness  is  followed  by  want  and  hunger.  There  are 
fourteen  countries  bordering  on  Bolshevik  Russia, 
and  they  are  directly  exposed  to  the  contagion. 
Proximity,  however,  would  not  be  necessary  to  a  de- 
velopment in  one  form  or  another  of  revolutionary 


THE  POWER  OF  MINORITIES        155 

movements  looking  to  the  establishment  of  communis- 
tic society.  In  every  country  in  Europe  there  is  a 
minority  that  is  profoundly  suspicious  of  and  dis- 
satisfied with  the  capitalistic  order.  They  found 
that  democracy  did  not  bring  to  the  proletariat  what 
it  considered  to  be  its  rightful  share.  Then  they 
organized  labor  unions  and  the  weapon  of  the  strike 
came  into  use.  The  organization  of  strikes  to  en- 
force the  demands  for  higher  wages  met  with  success, 
so  far  as  wages  are  measured  in  units  of  currency, 
bu-t  frequently  met  with  failure  to  better  the  con- 
dition of  the  workers  because  of  advancing  cost  of 
living.  Men  got  higher  wages  and  found  themselves 
worse  off.  This  has  contributed  toward  building  up 
a  sentiment  of  suspicion  of  the  very  foundations  of 
the  present  social  order,  and  everywhere,  England  in- 
cluded, there  is  a  significant  minority  that  refuses 
any  compromise  with  the  existing  order,  that  looks 
upon  all  concessions  to  labor  in  the  form  of  higher 
wages,  shorter  hours,  unemployment  insurance  or 
even  profit-sharing,  as  a  sop  thrown  by  capital  to 
divert  or  confuse  the  working  class. 

This  minority  of  extremists  nowhere  is  large.  In 
England  it  was  estimated,  in  both  conservative  and 
radical  quarters,  as  being  at  the  minimum  somewhere 
between  ten  and  fiften  per  cent,  of  the  total  organ- 
ized mass  of  union  labor.  I  fancy  the  proportion  is 


156      WHAT  HAPPENED  TO  EUROPE 

not  less,  and  I  doubt  if  it  is  much  more  in  any  of  the 
European  countries  which.  I  visited.  Everywhere  it 
is  an  active  and  distinctly  forceful  minority  and 
knows  much  of  the  power  of  propaganda.  Within 
the  labor  unions  themselves  the  radical  element  has 
a  voice  quite  out  of  proportion  to  its  numbers.  The 
unionist  who  is  comparatively  satisfied  with  his  lot 
and  has  little  faith  in  socialistic  schemes  to  improve 
it  is  apt  to  keep  away  from  the  controversial  dis- 
cussions and  fails  to  attend  most  of  the  meetings  of 
his  own  union.  Those  of  his  fellows  who  hold  ex- 
tremely radical  ideas  have  a  certain  fanatical  indus- 
try. They  are  always  busy  at  propaganda.  They 
are  always  keen  to  be  heard,  and  they  never  fail  to 
register  a  radical  vote  whenever  a  vote  is  to  be  taken. 
There  is  a  constant  struggle  on  the  part  of  con- 
servative leaders  of  union  labor  to  hold  in  check  the 
wing  of  their  organizations  represented  by  the  ex- 
treme radicals,  and  they  all  admit  that  there  is  a 
menacing  danger  that  the  minority  may  run  away 
with  the  majority.  Let  conditions  of  hardship  de- 
velop in  which  it  was  difficult  for  every  one  to  see 
means  of  mitigating  the  hardship  by  any  of  the  usual 
methods,  and  the  radical  minority  might  easily  as- 
sume leadership,  and  almost  overnight  find  itself  in 
command  of  the  situation.  This  is  why  it  is  not 
safe  to  base  predictions  of  the  future  course  of  events 


THE  POWER  OF  MINORITIES        157 

on  any  present  analysis  of  the  relative  numbers  of 
radicals  and  conservatives. 

In  recognizing  this  element  of  instability  in  the 
European  situation  it  might  be  well  if  we  took  the 
lesson  home  and  became  conscious  of  the  fact  that 
our  own  great  conservative  majority  is  phlegmatic, 
not  unified,  almost  voiceless,  and  at  the  same  time  note 
how  efficient  are  the  methods  of  active  radical  mi- 
norities. We  have  socialist  papers  with  a  million 
circulation.  There  is  a  steady  flow  of  incendiary 
pamphlets  through  the  tenements  of  the  East  Side, 
the  authors  of  some  of  which  could  legally  be  shot  for 
treason.  Socialistic  speeches  are  made  daily  in  Wall 
Street,  while  the  men  in  the  adjacent  offices  give  far 
more  time  to  scheming  how  to  get  advantage  of  a 
business  competitor,  than  they  give  to  original  think- 
ing on  economic  and  social  questions.  America  is 
the  greatest  of  democracies,  pledged  to  the  sover- 
eign rule  of  majorities;  and  America  should  beware 
of  the  power  of  minorities. 


CHAPTER  XIV 

THE  WORLD'S  FINANCIAL  CENTER 

Is  New  York  to  become  the  financial  center  of  the 
world?  That  is  a  question  which  first  arose  in  the 
minds  of  boasting  ignorance,  but  to-day  it  has  be- 
come a  question  that  is  entitled  to  be  asked  in  serious- 
ness, examined  with  care,  and  answered  in  the  light 
of  new  conditions.  There  are  three  important  rea- 
sons why  it  is  difficult  to  remove  the  financial  center 
of  the  world  from  London  to  New  York.  First,  there 
are  the  worn  channels  of  two  centuries  of  interna- 
tional commerce,  channels  worn  so  smooth  that  it  be- 
came easier  for  Chile  to  pay  a  bill  in  Peru  by  means 
of  a  draft  on  London  than  to  pay  direct.  London  is 
the  established  clearing  house  of  the  world,  and  by 
fair  treatment  and,  in  the  main,  by  holding  tightly  to 
sound  principles  of  banking,  has  maintained  the 
right  to  hold  what  she  long  ago  established  as  her 
own. 

There  is  a  fundamental  requisite,  however,  if  a 
city  is  to  be  the  financial  clearing  house  of  the  world. 
That  requisite  is  that  there  should  be  no  uncertain- 
ties surrounding  the  meaning  and  value  of  a  deposit 

158 


THE  WORLD'S  FINANCIAL  CENTER     159 

balance  in  a  bank  at  the  clearing  center.  It  has  al- 
ways been  England's  proud  boast  that  sterling  meant 
gold,  that  a  deposit  in  an  English  bank  could  under 
any  conditions,  at  the  will  of  the  depositor,  be  con- 
verted into  gold  and  sent  by  him  where  he  would. 
It  seems  to  me  that  this  is  an  essential  that  must  be 
possessed  by  the  international  clearing  house  of  the 
world,  unless  we  are  to  substitute  for  the  gold  stand- 
ard some  other  method  of  ultimate  payment  of  inter- 
national balances.  There  are  many  adroit  brains 
working  on  that  problem  to-day,  and  some  extremely 
interesting  plans  have  been  formulated  by  various 
European  bankers  looking  towards  the  creation  of 
an  international  currency  or  an  international  obli- 
gation by  the  means  of  which  international  current 
obligations  could  be  settled  in  a  world  clearing  house 
without  the  necessity  of  ultimate  redemption  in  gold. 
If  that  can  be  done,  then  England  perhaps  can  retain 
her  financial  supremacy.  If  it  cannot  be  done,  the 
ultimate  permanence  in  her  position  will  need  further 
analysis. 

Any  plan  looking  toward  the  payment  of  inter- 
national balances  in  any  other  medium  than  gold 
must  have  the  assent  of  the  United  States,  for  the 
United  States  is  now  the  great  creditor  nation,  and 
under  the  working  of  any  such  plan  would  become 
the  holder  of  a  vast  creation  of  the  proposed  inter- 


160      WHAT  HAPPENED  TO  EUROPE 

national  currency  or  clearing  house  credit  obliga- 
tion. Without  the  cooperation  of  the  United  States 
it  would  be  idle  to  plan  any  such  scheme.  And  it 
needs  no  deep  knowledge  of  finance  to  see  that  every 
plan  looking  toward  the  accomplishment  of  this  pur- 
pose could,  when  clearly  analyzed,  be  at  once  trans- 
lated into  language  that  our  laymen  could  under- 
stand. The  language  would  be  that  to  the  United 
States  was  assigned  the  position  of  "  holding  the 
bag." 

The  second  point  of  advantage  which  London  has 
over  New  York  is  her  geographical  position.  Physi- 
cally close  to  all  the  European  countries,  and  capable 
of  being  reached  from  most  of  them  direct  without 
passing  through  others,  she  has  enjoyed  a  unique 
advantage  compared  even  with  any  continental  point. 
Distances  in  geography  are  not  all  to  be  measured 
on  a  map  either,  but  rather  one  must  take  into  ac- 
count established  lines  of  communication.  England 
has  been  the  Mistress  of  the  Seas,  and  no  point  in 
the  world  has  had  such  international  mail  facilities  as 
London  has  had.  This  gives  to  London  a  central 
geographical  position  out  of  all  proportion  to  her 
advantageous  position  on  the  map.  Compared  with 
New  York,  under  the  present  conditions  of  transport 
and  with  the  present  routes  of  mail  delivery,  London 
has  a  vast  advantage.  The  greater  part  of  the  mail 


THE  WORLD'S  FINANCIAL  CENTER      161 

from  the  whole  continent  of  Europe  on  its  way  to 
New  York  passes  through  England,  as  is  the  case 
with  most  of  the  mail  from  the  Levant  and  some  from 
points  further  East. 

In  the  world  changes  that  have  come  about  I  am 
not  sure,  however,  but  that  we  are  even  going  to 
change  geography.  The  day  I  am  writing  this 
there  is  expected  to  take  place  the  first  trans- 
Atlantic  flight  of  an  aeroplane.  If  that  marvel  can 
be  accomplished  at  all,  and  there  seems  little  reason 
to  doubt  that  sometime  it  will  be,  is  it  altogether 
improbable  that  it  may  in  time  be  accomplished 
with  such  ease  and  with  such  speed  that  the  globe 
will  shrink  on  the  Atlantic  side  until  a  letter  from 
New  York  can  be  delivered  on  the  continent  almost 
as  quickly  as  a  letter  from  London  has  been  de- 
livered? The  English  are  showing  great  courage, 
skill  and  national  pride  in  forwarding  a  trans- 
Atlantic  flight.  I  am  not  sure  that  in  doing  so 
they  are  not  hastening  the  day  when  one  of  the 
great  advantages  of  financial  London  will  disappear 
because  progress  in  mechanics  will  in  effect  alter 
geography. 

The  first  two  advantages  that  London  has  over 
New  York,  the  advantage  of  long-worn  tradition  and 
of  geographical  location,  are  great,  but  she  has  an- 
other advantage  that  far  outdistances  either  of 


162      WHAT  HAPPENED  TO  EUROPE 

those,  an  advantage  as  difficult  to  overcome  as  are 
the  advantages  of  time  and  space  that  are  involved 
in  the  first  two  considerations.  This  last  is  a  human 
advantage,  an  advantage  of  possessing  skilled  men, 
men  who  have  grown  up  through  generations  en- 
gaged in  international  finance,  men  whose  minds  are 
trained  by  practice  and  tradition,  who  have  had  the 
advantage  of  international  association,  who  have  ac- 
quired international  understanding  and  who,  above 
all,  have  that  staunch  English  character  that  com- 
mands respect  of  dollars,  francs,  pesetas,  lire  or 
kroner.  Have  we  the  men  to  form  at  least  the 
nucleus  of  the  organization  we  must  form  if  New 
York  is  to  take  the  financial  palm  from  London,  and 
are  we  capable  of  quickly  training  the  large  number 
of  international  bankers  who  must  be  developed  to 
handle  the  intricate  business  of  international  finance, 
if  we  are  to  become  in  our  turn  the  clearing  house 
of  the  world? 

It  is  fair  to  say  that  London  bankers  doubt  our 
ability  to  create  the  technical  organization  that  will 
be  necessary,  if  we  are  to  try  to  assume  the  responsi- 
bility of  world  financial  leadership.  They  recognize 
frankly  their  present  disabilities,  but  they  think  the 
safety  of  their  position  lies  largely  in  our  inability 
to  create  a  competent  technical  group  of  interna- 
tional bankers,  and  back  of  that  to  educate  our  in- 


THE  WORLD'S  FINANCIAL  CENTER      163 

vesting  public  to  a  realization  of  the  opportunities 
and  responsibilities  that  go  with  international  finan- 
cial leadership. 

If  the  situation  were  one  in  which  there  was  really 
left  much  room  for  chance  or  choice,  there  would  be,  I 
think,  a  great  deal  of  force  in  the  English  view  of 
our  disabilities.  In  my  opinion,  however,  America's 
role  in  the  financial  world  in  the  future  is  practically 
an  inevitable  one.  The  measure  of  success  with 
which  we  play  it  will  be  gauged  by  the  ability  that 
we  bring  to  the  task,  but  we  will  have  to  show 
extraordinary  inaptitude  in  handling  the  opportuni- 
ties and  responsibilities  of  the  situation  if  we  block 
what  is  almost  an  inevitable  progress  toward  inter- 
national financial  leadership.  America  has  a  third 
of  the  monetary  gold  stock  in  the  world  and  has 
it  concentrated  for  effective  use  by  means  of  what 
is  on  the  whole  the  most  scientifically  organized 
banking  system  in  the  world.  Our  Federal  Reserve 
System  is  measurably  better  in  its  structure  than 
is  the  present  English  banking  system.  English 
bankers  freely  admit  that.  Some  of  the  leading 
bankers  are  looking  to  the  Federal  Reserve  System  as 
a  model  to  use  in  the  inevitable  reshaping  of  the 
structure  of  the  Bank  of  England  and  the  general 
banking  system  in  Great  Britain. 

A  bank  balance  in  America  certainly  should  be 


164      WHAT  HAPPENED  TO  EUROPE 

the  equivalent  of  gold  under  practically  any  cir- 
cumstances likely  to  arise,  and  in  any  event  a  bank 
balance  there  can  be  more  certainly  turned  into 
gold  than  can  a  bank  balance  in  any  other  financial 
center.  That  alone  should  make  New  York  the 
depository  of  a  great  part  of  the  international  bank 
balances  coming  from  every  quarter  of  the  world. 
Those  balances  will  be  placed  in  America  because  of 
the  readiness  with  which  they  can  be  converted  either 
into  bank  balances  elsewhere  or  into  gold  that  may 
be  shipped  to  augment  bank  balances  elsewhere. 

There  is  another  impressive  reason  why  fate  seems 
to  have  marked  New  York  for  a  position  of  inter- 
national financial  leadership.  As  a  nation  we  are 
already  a  foreign  creditor  to  such  an  amount  that 
annual  interest  payments  now  run  between  five  hun- 
dred and  six  hundred  million  dollars.  Added  to  that, 
we  are  the  greatest  producers  of  food  and  raw 
material  and  minerals  in  the  world,  and  for  years 
to  come  our  commodity  trade  balance  seems  likely 
to  run  several  hundred  millions  a  year  in  our  favor. 
In  what  is  this  huge  credit  to  be  paid?  It  must  in- 
evitably be  paid  in  foreign  securities.  We  may 
admit  that  our  investors  are  not  educated  to  foreign 
investments,  but  even  though  that  is  true  the  in- 
vestors, rather  than  the  foreign  investment,  must 
give  way,  and  we  must  see  to  it,  and  inevitably  will 


THE  WORLD'S  FINANCIAL  CENTER      165 

see  to  it,  that  our  investors  are  educated  to  an  un- 
derstanding and  appreciation  of  foreign  invest- 
ments. Whether  we  wish  to  or  not,  we  must  accept 
something  like  a  billion  dollars  a  year  of  foreign 
securities  and  they  must  be  placed  with  our  investors. 
There  is  no  other  way  to  settle  the  favorable  trade 
balance  which  the  next  few  years  will  inevitably 
create. 

If  then,  we  are  the  one  financial  center  where  a 
bank  deposit  is  equivalent  to  gold,  and  we  are  the 
principal  country  from  which  foreign  credits  must 
be  sought,  and  where  from  the  very  nature  of  the 
situation  they  must  be  granted,  then,  it  seems  to 
me,  we  have  the  elements  necessary  to  financial  leader- 
ship. We  must  develop  the  ability  and  understand- 
ing which  will  permit  us  to  cope  with  the  problems 
of  international  finance.  These  considerations  lead 
me  for  the  first  time  to  reach  the  conclusion  that 
the  answer  to  the  often  put  question  of  whether 
or  not  New  York  is  to  become  the  financial  center 
of  the  world  is  "  Yes." 


CHAPTER  XV 

AMERICA'S  OPPORTUNITY 

SOMETHING  of  what  the  Great  War  has  meant  to 
Europe  is  what  I  have  been  trying  to  describe  in 
the  preceding  chapters.  We  all  look  at  even  great 
events  in  the  light  of  our  own  personalities,  and 
what  America  is  most  keenly  interested  in  undoubt- 
edly is  what  the  Great  War  has  meant  to  America. 
Many  books  will  be  written  on  that  subject  alone 
and  to  attempt  such  an  analysis  in  a  single  chapter, 
and  to  attempt  it  before  the  currents  set  in  motion 
by  the  War  have  had  time  to  unite  in  any  great 
resultant  force  that  is  clearly  discernible  is  both 
difficult  and  dangerous.  Such  a  vision  as  any  one 
can  have  of  what  the  Great  War  has  meant  to 
America  must  at  best,  at  the  present  time,  be  im- 
perfect and,  indeed,  little  more  than  a  suggestion 
as  to  possibilities. 

There  are  some  points  in  respect  to  America's 
relative  position  in  the  world  that  can  be  defined 
with  a  fair  degree  of  assurance,  however.  The  ad- 
vantages of  America's  unique  position,  combining  the 

resources  of  the  greatest  world  capitalist  with  the 

166 


AMERICA'S  OPPORTUNITY  167 

resources  of  the  nation  richest  of  all  others  in  raw 
materials,  give  promise  of  a  material  prosperity 
unparalleled. 

In  the  industrial  world,  America  has  advantages 
which  will  enable  her  successfully  to  compete  with 
other  nations  and  at  the  same  time,  pay  rewards 
both  to  capital  and  to  labor  such  as  industry  in 
no  other  nation  can  pay.  Those  advantages  are 
inherent  in  our  own  position.  Other  nations,  to  a 
greater  or  less  degree,  are  workshops  to  which  raw 
material  must  be  brought  from  more  or  less  distant 
places,  wrought  into  finished  products  and,  in  part, 
again  exported  so  that  the  profit  of  the  workshop 
can  be  largely  used  in  importing  food  to  sustain  the 
workers. 

America  is  almost  self-contained  as  to  raw  materi- 
als. We  must  import  rubber,  but  all  other  rubber 
manufacturing  centers  must  do  the  same.  We  im- 
port some  ores  that,  mixed  with  our  own  inexhaustible 
supplies,  help  to  produce  a  higher  quality  of  prod- 
uct. Among  foods,  the  coffee  bean,  tea  and  choco- 
late are  perhaps  the  only  serious  demands  we  must 
make  on  other  lands.  Of  course,  we  must  have  im- 
ports if  the  world  is  to  pay  for  what  we  export,  and 
we  can  consume  large  values  of  foreign  fruits,  tea, 
chocolate,  nuts,  vegetable  oils  and  the  luxuries  of  silk, 
precious  gems  and  platinum  in  which  to  set  them. 


168      WHAT  HAPPENED  TO  EUROPE 

But  these  are  not  fundamental  necessities  to  our  in- 
dustrial life  as  are  the  imports  of  coal,  cotton,  wool, 
hides,  copper,  mineral  oils  and  cereals  that  are  funda- 
mental in  the  lives  of  the  great  industrial  centers  of 
the  world. 

So  much  Nature  has  done  for  us  but  our  own 
political  life  has  given  to  American  industry  an 
advantage  which,  if  we  had  but  that  alone,  would 
be  an  almost  determining  factor  in  giving  us  ulti- 
mately industrial  world  leadership.  The  manufac- 
turer who  has,  in  the  first  instance,  a  domestic  de- 
mand from  105,000,000  people,  rich  in  the  purchas- 
ing power  which  general  prosperity  gives  them,  sepa- 
rated by  no  hampering  political  boundaries,  with  no 
hurdles  of  tariff,  no  differences  of  language,  with 
no  unshakable  adherence  to  time-established  local 
differences  of  styles  —  a  body  of  105,000,000  people 
moving  freely  in  their  national  intercourse,  all  keenly 
receptive  of  any  improved  or  novel  design,  all  wear- 
ing much  the  same  type  of  hat  or  coat  or  shoes  and 
liberally  adopting  the  best  in  forms  of  tools,  in 
means  of  transportation  or  in  styles  of  articles  of 
luxury  or  entertainment,  the  manufacturer  having 
such  a  market  permitting  him,  as  it  does,  to  reap 
the  vast  advantages  of  mass  production  (no  matter 
what  line  of  goods  he  produces)  is  almost  at  once 
placed  in  a  position  so  superior  to  that  of  the  com- 


AMERICA'S  OPPORTUNITY  169 

petitors  lacking  these  advantages  that,  for  this  rea- 
son alone,  he  stands  almost  hors  de  concours. 

Then  we  may  add  to  these  advantages  a  back- 
ground of  almost  limitless  agricultural  capacity. 
We  have  fields  that  produce  under  our  methods  great 
yields  with  the  least  'expenditure  of  human  labor 
found  anywhere  in  the  world,  while  the  products  of 
those  fields  are  moved  at  the  lowest  transportation 
cost  of  any  land  transportation  in  existence.  There 
are  other  nations  that  move  tonnage  on  inland 
water-ways  more  cheaply  than  we  do,  it  is  true. 
There  are  other  acres  that  produce  per  acre  a  much 
higher  yield  but  if  we  compare  the  amount  of  human 
labor  expended  in  other  fields  with  the  amount  ex- 
pended in  ours,  the  difference  is  startling.  For  the 
whole  of  England,  for  example,  a  recent  census  shows 
that  the  average  number  of  agricultural  employees 
per  100  acres  is  46,  while  in  1910,  the  date  of  the 
last  census  figures,  the  478,451,750  acres  of  our 
improved  agricultural  lands  consumed  the  labor  of 
but  12,659,203  agricultural  workers  in  the  United 
States,  an  average  of  2.64  per  100  acres. 

Then  let  us  remember  that  there  has  been  com- 
paratively little  direct  disorganization  of  our  whole 
machinery  of  life  by  the  catastrophe  of  the  Great 
War,  while  in  Europe  there  has  been  not  only  im- 
measurable direct  destruction  from  the  War  but  what 


170      WHAT  HAPPENED  TO  EUROPE 

will  prove  more  harmful  than  all  that,  there  has 
been  disorganization  of  the  delicate  interrelations 
and  reactions  in  the  whole  international  industrial 
machine  which  it  will  take,  at  best,  a  generation  to 
correct. 

In  the  all  important  relationship  between  capital 
and  labor,  we  start  with  some  comparative  ad- 
vantages, too.  Labor  with  us  has  been  far  better 
paid  and  has  fewer  just  grievances  than  has  labor 
in  any  other  industrial  nation.  Still  we  have  our 
share  in  the  world  problem  of  bringing  about  true 
cooperation  between  capital  and  labor.  Those  na- 
tions which  make  the  greatest  progress  in  that  field 
will  have  an  ultimate  advantage  over  those  nations 
which  keep  up  an  internal  warfare  that  fosters  dis- 
content, resulting  in  great  masses  of  population  feel- 
ing that  they  are  living  under  conditions  of  bitter 
injustice.  This  is  true,  no  matter  what  other  advan- 
tages the  discontented  people  may  have. 

I  have  come  to  believe  that  half  the  woes  of  the 
world  are  directly  attributable  to  an  ignorance  of 
economic  law  and  to  a  blindness  to  social  injustices. 
In  the  end,  the  prosperity  of  a  people  always  bears 
a  true  relation  to  their  capacity  for  production.  If 
the  capacity  for  production  be  interfered  with,  as 
it  always  must  be,  when  workmen  are  discontented, 
because  they  feel  that  they  unfairly  share  in  the 


AMERICA'S  OPPORTUNITY  171 

profits  of  industry  and  because  of  economic  fallacies 
to  which  they  cling  that  result  in  a  conscious  limita- 
tion of  production,  then  the  limits  of  national  pros- 
perity are  sharply  bounded,  no  matter  what  the  rich- 
ness of  natural  resources  may  be.  Therefore  I  be- 
lieve that  the  measure  of  our  future  prosperity  in 
America  is  definitely  related  to  the  wisdom  with 
which  we  work  out  the  relationship  between  capital 
and  labor.  That  relationship  will  never  be  wisely 
worked  out  in  an  atmosphere  of  economic  ignorance. 
Our  failure  to  understand  the  purport  and  signifi- 
cance of  some  of  the  great  underlying  principles  of 
economics  is  general.  There  is  quite  as  much  of 
that  ignorance  in  the  managing  offices  as  there  is  in 
the  factories. 

Elsewhere  I  have  tried  to  give  some  exposition  of 
what  seems  to  me  the  greatest  problem  of  the  age  as 
it  is  presented  in  Europe,  the  problem  of  the  rela- 
tionship of  capital  and  labor.  I  believe  the  stability 
of  the  present  order  of  society,  the  maintenance  of 
a  society  based  upon  the  principle  of  property  rights, 
is  bound  up  with  the  way  this  problem  is  worked 
out  in  Europe.  We  cannot  stand  a  world  apart  in 
its  solution.  Indeed,  we  cannot  stand  a  world  apart 
in  any  sense.  No  matter  how  self-sufficient  we  may 
believe  ourselves  to  be,  no  matter  how  unlimited  are 
the  resources  of  natural  wealth  within  us,  we  are 


172      WHAT  HAPPENED  TO  EUROPE 

inevitably  part  of  what  is  coming  to  be  a  very  small 
world,  a  world  in  which  ideas  travel  with  a  freedom 
and  rapidity  that  must  force  us  to  become  interna- 
tionalists in  our  views,  and  must  govern  us  by  inter- 
national considerations,  whatever  may  be  our  nat- 
ural tendencies  to  Chauvinism  or  our  disposition  to- 
ward an  insular  isolation  and  security. 

A  farmer  in  a  Kansas  cornfield  may  fail  to  see 
what  concern  it  is  of  his  if  there  is  unrest  in  the 
Balkans,  Bolshevism  at  Warsaw,  a  growing  army 
of  adherents  to  Syndicalism,  or  Guild  Socialism  in 
England,  or  a  financial  crisis  in  France.  Inevitably, 
however,  this  farmer  in  the  center  of  America  will 
directly  feel  the  effects  of  all  the  ebullitions  of  life 
on  this  other  continent.  He  is  to-day  nearer  to 
the  things  that  may  happen  in  Paris,  in  Belgium  or 
in  London  than  were  the  peasant  farmers  in  those 
very  countries  to  their  own  capitals  in  times  gone 
by.  If  a  Kansas  farmer  is  to  find  his  direct  inter- 
ests involved,  quite  in  spite  of  himself  and  prob- 
ably without  his  knowledge  or  understanding,  in 
the  tangled  influences  that  will  be  working  on  the 
social  life  of  Europe,  then  what  may  be  said  of  the 
manufacturing  and  financial  interests  of  America 
that  are  already  conscious  of  their  relation  to  world 
affairs  ? 

Let  no  American  feel  that  he  can  escape  all  rela- 


AMERICA'S  OPPORTUNITY  173 

tionship  to  post-war  developments  in  Europe.  That 
is  impossible,  and  being  impossible,  we  should  at  least 
aim  to  understand  those  developments  sufficiently  to 
recognize  something  of  their  significance  to  us  and 
judge  of  our  responsibilities  to  the  outside  world. 
The  future  of  Europe  is  going  to  be  largely  shaped 
by  the  wisdom  or  the  lack  of  wisdom  that  we  in 
America  show  in  our  grasp  of  European  affairs,  in 
the  way  we  seize  our  world  opportunities  and  in  the 
sincerity  with  which  we  discharge  our  world  obliga- 
tions and  render  service  where  service  is  due.  If  we 
are  narrow,  provincial,  selfish,  all  those  qualities  will 
react  on  our  own  future.  If  we  are  wise,  broad  and 
generous  with  our  help,  our  recompense  will  be  be- 
yond measure. 

And  now  in  conclusion  I  want  to  say  one  solemn 
word  in  regard  to  the  supreme  lesson  which  I  have 
drawn  from  my  observation  of  the  present  situation 
in  Europe  and  that  is  a  lesson  to  which  I  have  not 
in  this  book  heretofore  referred.  It  is  the  duty  that 
lies  on  each  of  us  to  give  our  country  good  govern- 
ment. I  did  not  know  before  that  I  had  in  me  a 
power  of  such  poignant  sympathy  with  dumb  and  un- 
comprehending peoples  as  this  opportunity  for  obser- 
vation has  awakened.  One  hears  the  demagogue 
prate  about  his  love  for  the  people  and  properly  rates 
those  sentiments.  No  one  with  seeing  eyes  and  a 


174      WHAT  HAPPENED  TO  EUROPE 

sympathetic  heart  could  make  a  wide  observation  of 
present  European  conditions,  however,  without  being 
moved  to  his  depths  in  pity  of  peoples  who  are  suf- 
fering because  they  have  been  badly  governed. 

Here  is  half  the  world,  half  of  that  world  of  in- 
telligent, literate,  industrious  people  who  are  made 
on  much  the  same  lines  as  ourselves,  who,  through 
no  fault  of  their  own,  who,  in  spite  of  a  willingness 
to  labor  skillfully  and  industriously,  have  passed 
through  a  horrible  catastrophe  and  are  facing  an- 
other that  might  in  the  range  of  possibility  be  still 
worse.  Their  fate  has  been  and  will  be  directed  by 
factors  that  seem  outside  their  own  volition. 

Wherever  there  has  been  moderately  good  govern- 
ment, there  has  quickly  followed  astounding  progress. 
The  inherent  capacity  of  people  under  modern  condi- 
tions to  improve  their  surroundings,  given  the  boon 
of  honest,  wise  and  just  government,  is  marvelous; 
but  whatever  a  government  lacks  in  honesty,  wisdom 
and  judgment  this  is  quickly  reflected  in  a  plight  that 
seemingly  no  amount  of  fine  individual  characteris- 
tics can  overcome.  Much  of  the  lack  of  good  gov- 
ernment oomes  solely  from  ignorance. 

No  matter  in  what  direction  we  look,  we  find  some 
men  in  governmental  positions  who  seem  more  moved 
by  personal  ambition  than  by  an  unselfish  desire  wisely 
to  serve.  No  matter  what  desperate  national  cir- 


AMERICA'S  OPPORTUNITY          175 

cumstances  may  exist,  we  see  that  great  national 
needs  fail  sometimes  to  bring  out  from  national  lead- 
ers the  unselfish  service  that  their  people  should  have. 

I  have  said  that  it  appears  that  half  the  woes  of  the 
world  were  occasioned  by  economic  ignorance,  and 
it  seems  as  if  most  of  the  other  half  could  be  traced 
to  selfish  political  ambition.  And  so  this  is  the 
lesson  that  has  dominated  all  that  I  have  learned. 
It  is  that  the  crime  of  all  crimes,  most  far-reaching 
in  its  effect,  the  crime  which  involves  harm  to  more 
innocent  people  than  any  other  in  the  whole  category 
of  human  frailty  is  the  crime  of  abusing  the  privilege 
to  serve.  A  thief  may  injure  him  from  whom  he 
steals.  A  murderer  cuts  short  a  single  life.  Those 
crimes  are  as  nothing  compared  to  the  uncompre- 
hended  crime  which  a  public  official  commits  in  per- 
mitting personal  ambition  or  ignorance  to  blind  him 
to  public  duties. 

If  enough  Americans  could  see  what  endless  con- 
sequences of  sorrow  and  injustice  flow  from  the  al- 
most unconscious  acts  of  men  who  fail  to  recognize 
the  solemnity  of  a  public  trust  and  who  shape  their 
acts  on  lines  which  they  conceive  may  further  their 
personal  ambitions  rather  than  steadfastly  keeping 
before  them  the  opportunity  for  service  to  those  who 
have  put  them  in  high  position,  I  believe  that  Amer- 
ica could  then  easily  take  her  true  place  in  world 


176      WHAT  HAPPENED  TO  EUROPE 

leadership.  If  that  could  be  done,  there  would  be 
an  end  to  lightly  passing  over  failure  or  dereliction 
in  public  office.  Men  unfitted  by  ability  or  moral 
grip  to  comprehend  and  to  render  the  service  that 
they  might  do,  would  be  driven  from  public  place  by 
a  whirlwind  of  public  opinion.  Conversely,  men  who 
did  discharge  the  great  obligation  laid  upon  them  by 
a  public  trust  would  be  honored  far  beyond  the 
honors  that  can  possibly  come  to  success  in  other 
fields. 

And  so  it  all  goes  back  to  a  sound  citizenship,  to 
a  comprehension  by  all  of  us  of  our  individual  re- 
sponsibility for  good  government,  to  the  active  ac- 
ceptance of  individual  responsibility  by  every  man 
who  lays  any  claim  to  the  rank  of  good  citizenship. 


CHAPTER  XVI 


AFTER  I  had  had  an  opportunity  to  study  condi- 
tions throughout  the  European  countries  which  I  vis- 
ited, I  prepared,  just  as  I  was  leaving  Holland  on 
May  1st,  a  brief  outline  of  a  plan  for  an  interna- 
tional loan  to  these  European  nations  so  urgently  in 
need  of  aid  for  the  restarting  of  their  industrial  proc- 
esses. 

I  presented  this  outline  for  discussion  and  criticism 
to  some  of  our  American  officials  from  Washington, 
to  a  number  of  leading  French  statesmen  and  finan- 
ciers, and  to  the  principal  bankers  in  Holland  and  in 
London.  The  details  of  this  proposed  peace  loan 
might  be  worked  out  in  various  ways.  The  prin- 
ciples on  which  such  a  loan  is  based,  however,  I  feel 
should  follow  essentially  the  fundamental  lines  of  this 
brief  statement.  In  the  following  paragraphs  I  have 
set  forth,  in  practically  its  original  form,  the  mem- 
orandum discussed  with  the  various  government  of- 
ficials and  bankers  in  Europe. 

177 


178      WHAT  HAPPENED  TO  EUROPE 

MEMORANDUM  IN  REGARD  TO  AN  INTERNATIONAL  LOAN 

It  seems  to  me  obvious  that  the  problem  of  financ- 
ing the  rehabilitation  of  Belgium,  France,  or  any 
other  of  the  European  nations,  is  one  that  must  be 
solved  for  Europe  as  a  whole.  It  is  undesirable  to 
take  up  the  financing  of  one  country  separately  and 
at  the  same  time  allow  other  European  countries, 
through  lack  of  aid,  to  fail  in  restarting  industry. 

European  nations  might  be  compared  to  a  group 
of  houses  in  all  of  which  is  inflammable  material. 
Fire  in  any  one  would  endanger  all,  and  it  would 
hardly  be  worth  while  to  put  safeguards  against  fire 
originating  in  a  single  house.  The  safeguards  would 
have  to  be  put  in  all  the  houses  or  there  could  be  no 
safety  for  any  of  them. 

A  failure  to  restart  industry  in  any  European  na- 
tion, resulting  in  continued  idleness,  want,  and  hard- 
ship, is  certain  to  lead  to  social  upheavals  that  will 
be  communicated  to  other  nations.  The  problem, 
therefore,  is  an  inclusive  one,  and  must  be  so  solved 
that  there  will  be  a  serious  and  a  comprehensive  ef- 
fort made  to  reestablish  the  industrial  cycle  in  each 
one  of  the  European  countries  simultaneously.  If 
this  is  not  done,  there  can  be  no  safety  in  financing 
any  one  of  them. 

If  the  financing  of  reconstruction  is  considered  by 
nations  separately,  the  question  of  security  will  be- 


LOAN  TO  EUROPE  179 

come  a  determining  factor  in  any  plan  for  making 
advances.  Europe  presents  a  situation  in  which  the 
determining  factor  in  regard  to  rehabilitation  loans 
should  be  necessity  rather  than  security;  for,  unless 
those  nations  in  which  the  necessity  is  the  greatest 
are  cared  for  as  well  as  those  in  which  the  security 
might  be  thought  to  be  the  best,  social  or  industrial 
disorganization  may  result.  The  contagion  thus 
bred  might  spread,  endangering  the  whole  social  fab- 
ric of  Europe. 

The  element  of  time  is  now  of  prime  importance. 
Unless  there  is  speedy  action  in  the  direction  of  re- 
starting paralyzed  industry,  there  may  follow  a 
quick  march  of  events  toward  revolutionary  out- 
breaks in  any  country  where  idleness  is  continued  and 
is  followed  by  hunger  and  want.  The  prime  eco- 
nomic necessity  is  now  to  reestablish  the  flow  of  pro- 
duction, to  give  employment  to  the  millions  of  un- 
employed, and  to  get  each  European  country  started 
back  toward  a  normal  industrial  life.  The  danger  in 
not  doing  this  promptly,  or  in  not  doing  it  for  all,  is 
so  extreme  that  it  is  no  exaggeration  to  say  that  fail- 
ure to  do  this  may  mean  a  breakdown  in  European 
civilization  which  will  involve  the  whole  world.  The 
conditions  are  so  extraordinary  that  extraordinary 
means  of  coping  with  the  difficulties  should  not  be 
rejected  because  of  their  novelty. 


180      WHAT  HAPPENED  TO  EUROPE 

If  we  were  to  wait  for  government  credit  granting, 
there  may  be  involved  so  many  political  considera- 
tions that  an  amount  of  time  would  be  consumed  such 
as  to  make  any  projected  scheme  of  aid  without  avail. 
One  of  these  political  considerations  lies  in  the  fact 
that  those  nations  which  have  shared  in  the  ten  bil- 
lions of  loans  the  United  States  has  made  to  the  vari- 
ous European  governments,  now  feel  that  there  is 
just  ground  for  suggesting  that  these  loans  be  modi- 
fied or  even  canceled.  This  sentiment  is  general, 
and  is  held  in  high  places.  In  the  face  of  that  fact, 
it  would  seem  to  be  doubtful  wisdom  further  to  in- 
crease the  loans  which  our  government  has  made  to 
the  European  governments.  The  amount  required  is 
so  large  that  it  would  be  far  better  to  formulate  a 
plan  which  will  not  call  upon  already  overtaxed  gov- 
ernments. The  demands  can  much  better  be  met 
from  the  broader  sources  of  private  investment  if  a 
security  can  be  created  which  will  appeal  to  the 
private  investors.  But  if  the  situation  is  left  for 
private  investors  to  attempt  to  create  an  adequate 
security  in  individual  cases,  there  might  be  set  in 
motion  such  endless  negotiations  that  the  appre- 
hended catastrophe  would  be  likely  to  occur  before 
the  minds  of  lenders  and  borrowers  could  be  brought 
together. 

The  danger  which  would  surround  any  security 


LOAN  TO  EUROPE  181 

that  could  be  created  under  such  circumstances  would 
be  so  great  that  private  investors  would  be  forced 
to  demand  what  would  look  to  borrowers  like  extor- 
tionate rates ;  and  international  relationships,  which 
are  already  showing  evidence  of  strain,  would  be 
likely  to  undergo  still  greater  stress,  which  might  de- 
velop such  unhappy  international  results  as  to  en- 
danger any  attempt  to  create  adequate  credits  in 
this  form. 

With  these  considerations  in  view,  it  would  seem 
that  any  successful  attempt  to  finance  the  rehabilita- 
tion of  the  Continental  nations  must  keep  in  mind  the 
following  fundamental  principles : 

(1)  The  European  situation  must  be  treated  as 
a  whole. 

(2)  The  amount  involved  is  so  large  and  the  ele- 
ment of  time  so  important  that  it  is  extremely  dan- 
gerous to  undertake  the  legislative  programs   that 
would  be  necessary  before  lending  countries   could 
place  their  governments  in  a  position  adequately  to 
participate  in  a  loan  to  the  several  borrowing  na- 
tions. 

(3)  There  are  the  most  important  considerations 
pointing   to   the    desirability    of   accomplishing   the 
necessary  financing  at  a  moderate  rate  of  interest. 

(4)  The  political  situation  is  so  involved,  and  the 
financial  conceptions  so  various  and  chaotic  in  the 


182      WHAT  HAPPENED  TO  EUROPE 

different  countries  that  it  is  highly  desirable  to  pre- 
sent one  formula  for  obtaining  credit  which  all  the 
borrowing  countries  should  alike  follow. 

(5)  If     private     investment     funds     are     to     be 
promptly  and  successfully  attracted  at  moderate  in- 
terest rates,  there  must  be  created  an  obligation  that 
offers  the  highest  type  of  security  that  it  is  possible 
to  create. 

(6)  As  the  total  aggregate  of  what  each  borrow- 
ing nation  would  believe  was  a  minimum  required  for 
rehabilitation  of  its  industries  would  reach   a  sum 
too  large  to  be  contemplated  in  any  proposed  plan, 
the  lenders  should  determine,  based  upon  a  study  of 
the  necessities  of  each  nation,  what  the  apportion- 
ment of  any  proposed  loan  should  be  among  the  sev- 
eral nations. 

(7)  An  independent  judgment  arrived  at  in  the 
light  of  the  representations  made  by  each  nation  of 
the  minimum  necessary  to  start  industrial  production 
would  present  a  sounder  program  than  would  result 
if  each  individual  nation  were  merely  given  a  financial 
credit  and  left  free  to  work  out  the  expenditure  of 
that  credit  as  it  saw  fit. 

(8)  In  view  of  the  urgent  necessity  for  restarting 
the  industrial  processes,  a  necessity  paramount  to 
any  merely  financial  requirement,  the  entire  proceeds 
of  such  a  loan  as  is  herein  proposed  should  be  realized 


LOAN  TO  EUROPE  188 

by  each  borrowing  nation  in  the  actual  form  of  food, 
clothing,  fuel,  machinery,  raw  materials  for  manufac- 
ture, and  rolling  stock  for  the  rehabilitation  of  trans- 
portation; and  none  of  the  proceeds  of  such  a  loan 
should  go  into  the  treasuries  of  the  borrowing  na- 
tions to  be  used  for  governmental  financial  needs. 

In  view  of  the  foregoing  considerations  and  of  the 
suggested  principles  that  should  be  embodied  in  any 
comprehensive  scheme,  the  following  is  a  plan  for  an 
international  loan,  to  be  participated  in  by  the 
United  States  of  America,  the  Netherlands,  the  Scan- 
dinavian countries,  Switzerland,  Japan,  those  South 
American  countries  which  are  important  exporters  to 
Europe,  and  Great  Britain,  although  the  latter  to 
perhaps  a  limited  amount,  if  British  interests  so  de- 
sired. 

PLAN  FOE  AN  INTERNATIONAL  PEACE  LOAN 

The  governments  of  the  lending  nations  each 
should  appoint  a  consortium  of  bankers,  to  have- 
charge  in  the  respective  countries  of  the  flotation 
of  an  international  loan  of  a  certain  amount.  These 
consortiums  of  bankers  in  conjunction  with  their  re- 
spective governments  each  should  appoint  members 
of  an  International  Loan  Commission,  the  headquar- 
ters of  which  might  well  be  in  the  Peace  Palace  at 
The  Hague;  and  the  number  of  representatives  of 


184      WHAT  HAPPENED  TO  EUROPE 

each  country  respectively,  or  their  voting  power, 
should  be  equitably  determined. 

The  International  Loan  Commission  would  de- 
termine, from  the  facts  regarding  the  industrial  situ- 
ation in  each  of  the  possible  borrowing  countries,  the 
proportionate  allocation  of  parts  of  the  total  loan  to 
each  borrowing  nation;  and  later  should  determine, 
in  conjunction  with  representatives  from  the  borrow- 
ing nations,  the  definite  amounts  of  machinery,  raw 
material,  rolling  stock,  etc.,  which  should  be  fur- 
nished. 

Each  lending  nation  would  furnish,  according  to 
its  capacity,  an  amount  of  machinery,  raw  materials, 
etc.,  equal  to  its  amount  of  participation  in  the  inter- 
national loan,  with  adequate  safeguards  insuring  to 
the  borrowers  that  these  materials  were  furnished  at 
proper  prices. 

The  International  Loan  Commission  would  pro- 
pose to  the  borrowing  nations  that  they  would  fur- 
nish to  them  credits  to  the  determined  amounts,  to  be 
expended  in  the  way  provided,  against  obligations 
that  in  the  case  of  every  nation  followed  the  same 
formula.  The  obligations  would  run  for  say  fifteen 
years,  bear  —  per  cent,  interest,  provide  for  amorti- 
zation of  one-fifteenth  each  year,  and  be  repayable, 
interest  and  amortization  in  the  currencies  of  the 
various  lending  countries  in  the  proportion  in  which 


LOAN  TO  EUROPE  185 

the  obligation  was  at  the  time  of  each  interest  pay- 
ment actually  held  by  the  nationals  of  such  country. 

Each  borrowing  nation  should  pledge  a  first  lien 
upon  its  customs  revenue  to  meet  the  interest  and 
amortization  service  of  that  portion  of  the  interna- 
tional loan  allocated  to  that  particular  nation. 

The  International  Loan  Commission  would  issue 
for  sale  to  the  investors  in  each  loaning  nation  its 
obligations  secured  by  the  obligations  of  the  sev- 
eral borrowing  nations.  The  interest  charge  on  the 
obligation  of  the  International  Loan  Commission 
would  be  the  first  charge  against  all  the  income  re- 
ceived by  the  Loan  Commission  from  all  of  the  bor- 
rowing nations.  If  one  or  more  of  the  borrowing 
nations  defaulted  in  the  first  years  of  the  contract, 
the  International  Loan  Commission  could  devote  such 
part  of  the  amortization  funds  received  from  the 
other  nations  as  might  be  necessary  to  the  payment 
of  interest  on  the  International  Loan  Commission's 
total  outstanding  bonds  and  any  such  depletion  of 
amortization  funds  could  subsequently  be  made  good 
when  the  defaulting  nation  made  good  its  overdue 
obligations.  The  result  of  this  would  be  that  even  in 
the  event  a  nation  defaulted  in  its  obligations  to  the 
International  Loan  Commission,  the  full  interest  pay- 
ments would  be  kept  up  on  the  obligations  issued  by 
the  International  Loan  Commission,  and  time  would 


186      WHAT  HAPPENED  TO  EUROPE 

thus  be  given  to  any  dafaulting  nation  to  subse- 
quently make  up  this  default.  If  it  were  unable  to 
do  that  before  the  final  maturity  of  the  loan,  the  loss 
would  then  make  itself  manifest  in  a  deficit  in  the  ulti- 
mate final  payment  of  the  principal  of  the  Interna- 
tional Loan  Commission's  obligations. 

Each  borrowing  nation  would  undertake  to  lay 
sufficient  import  duties  to  provide  amply  for  its  obli- 
gations to  the  International  Loan  Commission.  The 
obligations  would  include  in  addition  to  the  interest 
and  amortization  of  the  original  loan,  the  proper  ex- 
pense of  the  flotation  of  the  International  Loan  Com- 
mission's obligations,  and  the  expense  of  the  Interna- 
tional Loan  Commission  up  to  the  final  discharge  of 
its  obligations. 

Any  borrowing  nation  finding  itself  in  a  position 
to  liquidate  its  obligation  to  the  International  Loan 
Commission  in  advance  of  the  maturities  of  those  obli- 
gations, and  desiring  to  do  so,  would  be  permitted  to 
liquidate  those  obligations  at,  say 


The  point  may  at  once  be  raised  that  some  at  least 
of  the  borrowing  nations  would  raise  objection  to 
pledging  a  first  lien  on  their  customs  receipts.  If 
such  a  proposal  were  made  individually  to  separate 
nations,  that  objection  might  be  insurmountable. 
The  difficulties  of  the  situation  are  so  great,  however, 


LOAN  TO  EUROPE  187 

that  nothing  short  of  a  prior  lien  obligation  would 
offer  sufficient  security  to  warrant  bankers  going  to 
the  investment  public  with  an  obligation  for  the  in- 
dustrial rehabilitation  of  Europe;  and  if  all  of  the 
borrowing  nations  were  asked  to  follow  the  same 
formula,  the  political  objections  would  be  far  less 
serious  than  if  an  attempt  were  made  to  induce  gov- 
ernments one  at  a  time  to  thus  grant  a  priority  lien. 
Any  government  that  found  itself  in  a  position  to 
finance  on  more  favorable  terms  subsequently  could 
relieve  itself  of  this  pledge  of  revenue  by  redeeming 
its  obligations  to  the  International  Loan  Commission 
at  a  moderate  premium. 

The  plan  which  is  in  the  mind  of  many  of  the  finan- 
cial officials  of  the  borrowing  governments,  to  redis- 
count their  expected  indemnity  claims  against  the 
Central  Powers,  is  one  which  will  find  little  favor 
among  investors.  The  investors  of  no  lending  na- 
tion will  be  disposed  to  put  themselves  in  a  position 
of  collecting  this  indemnity  from  either  an  impotent 
or  unwilling  power.  If  the  indemnity  is  paid,  the 
obligation  which  it  is  proposed  to  secure  by  putting 
up  the  indemnity  as  collateral  would  be  paid.  If  it 
is  not  paid,  the  task  of  collecting  it  is  not  one  that 
any  thoughtful  investor  will  voluntarily  become  in- 
volved in. 

Nothing  in  the  foregoing  plan,  however,  would  pre- 


188      WHAT  HAPPENED  TO  EUROPE 

vent  a  nation  from  rediscounting  the  indemnity  obli- 
gations which  it  might  secure  if  it  desired  to  do  so 
and  could  find  a  lender.  Nor  would  the  granting  of 
individual  commercial  credits  be  in  any  way  cur- 
tailed. Individual  commercial  credits  will  eventually 
perform  a  most  important  function,  but  until  the 
preliminary  work  of  getting  industry  started  in  all 
the  countries  has  been  undertaken,  there  is  a  lack  of 
security  in  all  individual  commercial  loans,  without 
regard  to  the  wealth  of  the  borrower,  because  his 
total  wealth  may  be  subject  to  depreciation  or  extinc- 
tion by  revolution.  That  is  why  I  believe  the  first 
step  should  be  the  comprehensive  one  of  furnishing 
the  minimum  necessary  to  restart  industry  in  all 
European  nations  concurrently. 


PRINTED    IN    THE    UNITED    STATES    OF    AMERICA 


'HE  following  pages  contain  advertisements  of  a  few 
of  the  Mac  mil  Ian  books  on  kindred  subjects. 


"Brilliant  Synthesis  of  the  World's  Peace  Problems" 

The  Great  Peace 

PY  H.  H.  POWERS 

Author    of    "  America   Among    the    Nations,"    "  The    Things    Men. 
Fight   For,"   etc. 

Cloth,   litno,   $2.25 

"  The  necessity  for  speed  laid  upon  the  author  found  him  amply 
prepared  by  study,  travel,  training  and  practice.  However  hurried  his 
task  of  writing,  his  arguments  and  conclusions  are  manifestly  results 
of  long,  earnest,  soberly  measured  and  carefully  digested  thought. 
Presented  in  the  author's  graphic,  comprehensive  anil  impressive 
style,  they  constitute,  in  effect,  a  clew  to  the  vast  labyrinth  through 
which  the  Versailles  conference  must  shortly  wander  distraught." 

"  The  peace  conferees  took  a  dictionary  and  encyclopedia  along 
for  a  library.  They  should  add  Mr.  Powers'  book  —  it  would  be 
helpful  amid  even  a  stock  of  universal  knowledge." —  The  Philadelphia 
North  American. 

"  The  terms  of  peace  to  be  agreed  upon  must  be  based  on  the  fullest 
recognition  of  the  special  problems  and  wishes  of  the  associated  na- 
tions. The  problem  of  problems  is  the  control  of  the  sea.  .  .  .  These 
questions  are  discussed  with  thoughtfulness  and  clarity,  and  a  wide 
grasp  of  circumstances  and  difficulties." —  The  Detroit  Free  Press. 


"An  able,  unprejudiced  and  illuminating  treatment  of  a  burn- 
ing question."  —  Philadelphia  North  American. 

The  Things  Men  Fight  For 


BY  H.  H.  POWERS 

Cloth,  J2mo,  $1.50 

arces  has 
id  causes 


, 

"  Probably  no  other  book  dealing  with  the  war  and  its  sou 
made  so  dispassionate  and  unbiased  a  study  of  conditions  anc 
as  does  this  volume."  —  New  York  Times. 

"  Dr.  Powers'  volume  is  one  of  the  most  arresting,  stimulating  and 
original  discussions  dealing  with  the  fundamental  causes  of  war  thus 
far  published."  —  Philadelphia  Press. 

"  Without  doubt  it  is  one  of  the  best  books  of  the  year  relative  to 
the  great  European  war,  because  it  calmly  gives  all  sides  of  the 
question  and  is  critically  analytic.  If  one  can  enjoy  reading  a  war 
book  this  is  the  one."  —  Boston  Globe. 


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TWO  NEW  BOOKS  ON  RECONSTRUCTION 

Reconstruction  and  National  Life 

BY  CECIL  FAIRFIELD  LAVELL 

Cloth,   izmo,   $1.60 

The  purpose  of  Professor  Lavell's  new  volume  is,  primarily,  to  sug- 
gest and  illustrate  an  historical  approach  to  the  problem  of  recon- 
struction in  Europe.  Professor  Lavell  will  be  remembered  _as  author, 
with  Professor  Charles  E.  Payne,  of  "  Imperial  England,"  published 
in  the  fall  of  last  year. 

Problems  of  Reconstruction 

BY  ISAAC  LIPPINCOTT 

Associate   Professor   of    Economics,    Washington    University 

Cloth,  I2mo,  $1.60 

"From  an  industrial  point  of  view  the  nations  at  war  are  con- 
fronted with  two  groups  of  problems.  Stated  briefly,  the  first  group 
contains  questions  of  concentrating  industrial  effort  largely  on  war 
production,  of  diverting  men,  materials  and  financial  resources  to  the 
essential  industries  and  of  curtailing  the  operations  of  all  the  rest,  of 
regulating  commerce  with  foreign  countries,  and  of  formulating  policies 
and  methods  for  the  accomplishment  of  these  ends.  In  short,  this  is 
principally  a  question  of  development  of  war  control  with  all  that 
this  implies.  The  second  group  of  problems  arises  out  of  the  first. 
It  involves  such  questions  as  the  dissolution  of  the  war  organization, 
the  removal  of  the  machinery  of  control,  the  restoration  of  men, 
funds,  and  materials  to  the  industries  which  serve  the  uses  of  peace, 
and  the  reestablishment  of  normal  commercial  relations  with  the  out- 
side world.  The  latter  are  post-war  problems.  Their  prompt  solution 
is  necessary  because  the  war  has  turned  industrial  and  social  life 
into  new  channels,  and  because  it  will  be  necessary  for  us  to  restore 
the  normal  order  as  quickly  as  possible  These  brief  statements  out- 
line the  tasks  of  this  volume." 


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K.  K.  KAWAKAMl'S  NEW  BOOK 

Japan  and  World  Peace 

Cloth,  izmo,  $1.50 

Japan  and  the  Eastern  countries  with  their  political,  geo- 
graphical and  racial  problems,  are  inextricably  bound  up  with 
the  interests  of  the  United  States  and  the  successful  main- 
tenance of  world  peace.  At  no  time  has  there  been  a  greater 
need  for  our  thorough  understanding  of  Japan's  problems. 

Mr.  Kawakami  is  a  Japanese  of  progressive  ideals.  In  his 
new  book  he  describes  Japan's  place  in  the  League  of  Na- 
tions. He  defines  Japan's  attitude  towards  democracy  and 
the  Monroe  Doctrine  and  explains  her  policy  with  regard  to 
China  and  Siberia.  What  he  writes  is  of  the  utmost  impor- 
tance to  every  thinking  American  reader  who  would  under- 
stand the  future  policy  of  Japan  and  her  probable  relations 
with  the  United  States. 

BY  THE  SAME  AUTHOR 

Japan  in  World  Politics 

BY  K.  K.  KAWAKAMI 

Cloth,  izmo,  $1.50 

"  Not  often  does  one  find  a  discussion  of  Japanese  and 
American  relations  that  will  compare  with  this  book  in  sanity, 
reasonableness,  judicial  temper,  and  ability  to  see  the  rights 
and  wrongs  of  all  sides  of  a  question." — New  York  Times. 


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An  American  Labor  Policy 

BY  JULIUS  HENRY  COHEN, 

Author  of  "  Law  and  Order  in  Industry,"  "  The  Law :  Busi- 
ness or  Profession?"  "Commercial  Arbitration  and  the 
Law" 

Cloth,  izmo,  $1.00 

The  author  believes  that  what  is  needed  at  the  present  time  for  the 
stabilizing  of  our  industrial  situation  is  not  a  British  Plan,  or  a 
French  Plan,  or  a  Russian  Plan,  but  an  American  Plan,  in  harmony 
with  our  institutions,  our  laws,  our  customs  and  our  outlook  gener- 
ally. The  "  principle  of  social  cooperation  "  which  is  to  be  put  into 
a  League  of  Nations  in  order  to  insure  "  solidarity  among  men  "  as 
well  as  "protection  and  of  justice  against  violence"  must  also  be 
put  into  industry.  The  analogies  and  definite  experiences  herein 
put  forth  will  help  to  save  the  country  from  an  impending  crisis,  and 
the  enlightened  leaders  of  labor  and  of  management,  as  well  as 
capital,  will  find  therein  some  suggestion  for  a  basis  of  cooperation. 

The  following  are  the  topics  he  takes  up:  Industrial  Law,  Philoso- 
phy of  Violence,  The  Modern  Spirit,  Organization  In  Industry,  Con- 
stitutionalizing  Industry  Morale  in  Industry,  Hiring  and  Firing,  In- 
dividual and  Collective  Bargaining,  What  Is  The  Next  Step? 


The  Shop  Committee 

A  HAND-BOOK  FOR  EMPLOYERS  AND  EMPLOYEES 

BY  WILLIAM  LEAVITT  STODDARD,  A.B.,  A.M.,  Harvard 

Administrator    for    the    National    War    Labor    Board,    1918-1919 

Cloth,  izmo,  $1.25 

The  Shop  Committee  is  a  new  thing  in  industry.  Here  is  a  clear 
statement  of  the  essential  principles  and  facts  of  the  Shop  Com- 
mittee System,  what  it  is  and  how  it  works.  Every  large  employer 
will  be  vitally  interested  in  this  new  industrial  movement,  described 
for  the  first  time  in  Mr.  Stoddard's  book. 

During  the  critical  period  of  the  war  the  author  was  an  administrator 
for  The  National  War  Labor  Board  and  in  such  capacity  developed 
the  shop  committee  system  in  several  large  industrial  plants.  His 
book  tells  in  detail  the  introduction,  operation  and  success  of  this  sys- 
tem and  shows  how  the  shop  committee  idea  is,  for  both  workingman 
and  employer,  the  ideal  intra-factory  machinery  for  eliminating  friction, 
bringing  about  good  relations,  and  promoting  the  practice  and  exten- 
sion of  genuinely  collective  bargaining. 

Mr.  Stoddard's  book  ushers  in  a  new  era  in  industrial  relations. 


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Publishers     64-66  Fifth  Avenue     New  York 


DATE  DUE 


tit* 


HECDDEC131968 


PRINTED  IN  U.S. 


000  495  826 


3   1970  02196  3878 


